Doing Business 2010 Russian Federation
Jun 26, 2015
Doing Business 2010
Russian Federation
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Additional copies of Doing Business 2010: Reforming through Difficult Times, Doing Business 2009, Doing
Business 2008, Doing Business 2007: How to Reform, Doing Business in 2006: Creating Jobs, Doing Business in
2005: Removing Obstacles to Growth and Doing Business in 2004: Understanding Regulations may be purchased
at www.doingbusiness.org
ISBN: 978-0-8213-7961-5
E-ISBN: 978-0-8213-7965-3
DOI: 10.1596/978-0-8213-7961-5
ISSN: 1729-2638
Library of Congress Cataloging-in-Publishing Data has been applied for.
Printed in the United States.
Current features News on the Doing Business project
www.doingbusiness.org
Rankings How economies rank-from 1 to 183
www.doingbusiness.org/economyrankings
Reformers Short summaries of DB2010 reforms, lists of reformers since DB2004
and a ranking simulation tool
www.doingbusiness.org/reformers
Historical dataCustomized data sets since DB2004
www.doingbusiness.org/customquery
Methodology and research The methodologies and research papers underlying Doing Business
www.doingbusiness.org/MethodologySurveys
Download reports Access to Doing Business reports as well as subnational and regional
reports, reform case studies and customized country and regional
profiles
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Subnational and regional projects Differences in business regulations at the subnational and regional
level
www.doingbusiness.org/subnational
Law LibraryOnline collection of business laws and regulations relating to
business and gender issues
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www.doingbusiness.org/genderlawlibrary
Local partners More than 8,000 specialists in 183 economies who participate in
Doing Business
www.doingbusiness.org/LocalPartners
Reformers’ Club Celebrating the top 10 Doing Business reformers
www.doingbusiness.org/Reformers/ReformersClub.aspx
Business Planet Interactive map on the ease of doing business
http://www.doingbusiness.org/map
Contents
Introduction 1
and Aggregate Rankings
Starting a Business 5
Dealing with
Construction Permits 10
Employing Workers 16
Registering Property 20
Getting Credit 25
Protecting Investors 29
Paying Taxes 33
Trading Across Borders 37
Enforcing Contracts 41
Closing a Business 45
Doing Business 2010 49
Reforms
1
Doing Business 2010: Reforming Through Difficult Times is the seventh in a series of annual reports investigating
regulations that enhance business activity and those that constrain it. Doing Business presents quantitative indicators
on business regulations and the protection of property rights that can be compared across 183 economies, from
Afghanistan to Zimbabwe, over time.
A set of regulations affecting 10 stages of a business’s life are measured: starting a business, dealing with construction
permits, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across
borders, enforcing contracts and closing a business. Data in Doing Business 2010: Reforming Through Difficult Times
are current as of June 1, 2009*. The indicators are used to analyze economic outcomes and identify what reforms have
worked, where, and why.
The Doing Business methodology has limitations. Other areas important to business such as an economy’s proximity
to large markets, the quality of its infrastructure services (other than those related to trading across borders), the
security of property from theft and looting, the transparency of government procurement, macroeconomic conditions
or the underlying strength of institutions, are not studied directly by Doing Business. To make the data comparable
across economies, the indicators refer to a specific type of business, generally a local limited liability company
operating in the largest business city. Because standard assumptions are used in the data collection, comparisons and
benchmarks are valid across economies. The data not only highlight the extent of obstacles to doing business; they
also help identify the source of those obstacles, supporting policymakers in designing reform.
The data set covers 183 economies: 46 in Sub-Saharan Africa, 32 in Latin America and The Caribbean, 27 in Eastern
Europe and Central Asia, 24 in East Asia and Pacific, 19 in the Middle East and North Africa and 8 in South Asia, as
well as 27 OECD high-income economies as benchmarks.
The following pages present the summary Doing Business indicators for the Russian Federation. The data used for this
country profile come from the Doing Business database and are summarized in graphs. These graphs allow a
comparison of the economies in each region not only with one another but also with the “good practice” economy for
each indicator.
The good-practice economies are identified by their position in each indicator as well as their overall ranking and by
their capacity to provide good examples of business regulation to other countries. These good-practice economies do
not necessarily rank number 1 in the topic or indicator, but they are in the top 10.
More information is available in the full report. Doing Business 2010: Reforming Through Difficult Times presents
the indicators, analyzes their relationship with economic outcomes and recommends reforms. The data, along with
information on ordering the report, are available on the Doing Business website (www.doingbusiness.org).
* Except for the Paying Taxes indicator that refers to the period January to December of 2008.
Note: Doing Business 2008 and Doing Business 2009 data and rankings have been recalculated to
reflect changes to the methodology and the addition of new countries (in the case of the rankings).
Economy Rankings - Ease of Doing Business
Russian Federation's ranking in Doing Business 2010
Russian Federation - Compared to global good practice economy as well as selected economies:
Russian Federation is ranked 120 out of 183 economies. Singapore is the top ranked economy in the Ease of Doing
Business.
Doing Business 2010
Ease of Doing Business 120
Starting a Business 106
Dealing with Construction Permits 182
Employing Workers 109
Registering Property 45
Getting Credit 87
Protecting Investors 93
Paying Taxes 103
Trading Across Borders 162
Enforcing Contracts 19
Closing a Business 92
Rank
2
Summary of Indicators - Russian Federation
Starting a Business Procedures (number) 9
Time (days) 30
Cost (% of income per capita) 2.7
Min. capital (% of income per capita) 1.8
Dealing with Construction Permits Procedures (number) 54
Time (days) 704
Cost (% of income per capita) 2140.7
Employing Workers Difficulty of hiring index (0-100) 33
Rigidity of hours index (0-100) 40
Difficulty of redundancy index (0-10) 40
Rigidity of employment index (0-100) 38
Redundancy costs (weeks of salary) 17
Registering Property Procedures (number) 6
Time (days) 43
Cost (% of property value) 0.1
Getting Credit Strength of legal rights index (0-10) 3
Depth of credit information index (0-6) 5
Public registry coverage (% of adults) 0.0
Private bureau coverage (% of adults) 14.3
Protecting Investors Extent of disclosure index (0-10) 6
Extent of director liability index (0-10) 2
Ease of shareholder suits index (0-10) 7
Strength of investor protection index (0-10) 5.0
Paying Taxes Payments (number per year) 11
Time (hours per year) 320
Profit tax (%) 10.9
Labor tax and contributions (%) 31.8
Other taxes (%) 5.7
Total tax rate (% profit) 48.3
Trading Across Borders Documents to export (number) 8
Time to export (days) 36
Cost to export (US$ per container) 1850
Documents to import (number) 13
Time to import (days) 36
Cost to import (US$ per container) 1850
Enforcing Contracts Procedures (number) 37
Time (days) 281
Cost (% of claim) 13.4
Closing a Business Recovery rate (cents on the dollar) 28.2
Time (years) 3.8
Cost (% of estate) 9
4
When entrepreneurs draw up a business plan and try to get under way, the f irst hurdles they face are the procedures required to incorporate and register the new f irm before they can legally operate. Economies differ greatly in how they regulate the entry of new businesses. In some the process is straightforward and affordable. In others the procedures are so burdensome that entrepreneurs may have to bribe officia ls to speed up the process or may decide to run their business informally. Analysis shows that burdensome entry regulations do not increase the quality of products, make work safer or reduce pollution. Instead, they constrain private investment; push more people into the informal economy; increase consumer pr ices and fuel corruption. Methodology The data on starting a business is based on a survey and research investigating the procedures that a standard small to medium -size company needs to complete to star t operations legally. This includes obtaining all necessary permits and licenses and completing all required inscriptions, verifications and notif ications with authorities to enable the company to formally operate. Procedures are recorded only where interaction is required with an external party. It is assumed that the founders complete all procedures themselves unless professional services (such as by a notary or lawyer) are required by law. Voluntary procedures are not counted, nor are industry–specific requirements and utility hook-ups. Lawful shortcuts are counted. It is assumed that a ll in formation is readily available to the entrepreneur, that there has been no pr ior contact with offic ia ls and that a ll government and nongovernment entities involved in the process function without corruption. Survey Case Study The business: is a limited l iability company conducting general commercial activities is located in the largest business city
is 100% domestically owned has a start-up capita l of 10 times income per capita has a turnover of at least 100 times income per capita has between 10 and 50 employees does not qualify for any special benefits
does not own real esta te
5
Starting a Business data Doing Business 2008 Doing Business 2009 Doing Business 2010
Rank .. 88 106
Procedures (number) 9 9 9
Time (days) 30 30 30
Cost (% of income per capita) 4.8 3.3 2.7
Min. capital (% of income per capita) 3.2 2.2 1.8
1. Historical data: Starting a Business in the Russian Federation
2. The following graphs illustrates the Starting a Business indicators in the Russian Federation over
the past 3 years:
6
3. Steps to Starting a Business in the Russian Federation
It requires 9 procedures, takes 30 days, and costs 2.72 % GNI per capita to start a business in the Russian Federation.
List of Procedures:
1. Notarize foundation documents
2. Deposit capital in the bank and get proof thereof
3. Pay registration fee
4. Register with the unified register at the Federal Tax
Service on the local level, to obtain the single number
of state registration and the number of tax registration
(identification number of taxpayer,INN); register with
the State Pension Fund, the State
5. Notarize Registration Certificate, Tax Payer
Identification Number Certificate and Bank
SignatureCard.
6. Open the company bank account
7. Inform Federal Tax Service of the company bank
account number and obtain a special letter of
confirmation
8. Register the company with Moscow Center of
Quotation of Work Places
9. Register seal with the local Registration Chamber
7
More detail is included in the appendix.
4. Benchmarking Starting a Business Regulations:
Russian Federation is ranked 106 overall for Starting a Business.
Ranking of the Russian Federation in Starting a Business - Compared to good practice and selected economies:
8
Procedures
(number)
Time (days) Cost (% of
income per
capita)
Min. capital
(% of income
per capita)
Denmark* 0.0
New Zealand* 1 1 0.0
Good Practice
Economies
Russian Federation 9 30 2.7 1.8
Selected Economy
Brazil 16 120 6.9 0.0
China 14 37 4.9 130.9
India 13 30 66.1 210.9
Japan 8 23 7.5 0.0
Kazakhstan 7 20 4.8 13.4
Mexico 8 13 11.7 8.9
Comparator Economies
The following table shows Starting a Business data for the Russian Federation compared to good practice and comparator
economies:
* The following economies are also good practice economies for :
Procedures (number): Canada
Cost (% of income per capita): Slovenia
9
Once entrepreneurs have registered a business, what regulations do they face in operating it? To measure such regulation, Doing Business focuses on the construction sector . Construction companies are under constant pressure from government to comply with i nspections, with licensing and safety regulations, from customers to be quick and cost-effective. These conflicting pressures point to the tradeoff in building regulation; the tradeoff between protecting people (construction workers, tenants, passersby) and keeping the cost of building affordable . In many economies, especially poor ones, complying with building regulations is so costly in time and money that many builders opt out. Builders may pay br ibes to pass inspections or simply build illegally, leadi ng to hazardous construction. Where the regulatory burden is large, entrepreneurs may tend to move their activity into the informal economy. There they operate with less concern for safety, leaving everyone worse off. In other economies compliance is simple, stra ightforward and inexpensive, yielding better results. Methodology The indicators on dealing with construction permits record all procedures officially required for an entrepreneur in the construction industry to build a warehouse. These include su bmitting project documents (building plans, site maps) to the authorities, obtaining all necessary licenses and permits, completing all required notifications and receiving all necessary inspections. They also include procedures for obtaining utility conne ctions, such as e lectric ity, telephone, water and sewerage. The time and cost to complete each procedure under normal circumstances are calculated. All official fees associated with legally completing the procedures are included. Time is recorded in calendar days. The survey assumes that the entrepreneur is aware of all existing regulations and does not use an intermediary to complete the procedures unless required to do so by law. Survey Case Study The business:
is a small to medium-size limited liabilit y company is located in the largest business city is domestically owned and operated, in the construction business has 20 qualif ied employees The warehouse to be built :
is a new construction (there was no previous construction on the land) has complete architectural and technical plans prepared by a licensed architect will be connected to e lectric ity, water, sewerage (sewage system, septic tank or their equivalent) and one land
phone line. The connection to each utility network will be 32 feet, 10 inches ( 10 meters) long.
will be used for general storage, such as of books or stationery. The warehouse will not be used for any goods requiring special conditions, such as food, chemicals or pharmaceuticals.
will take 30 weeks to construct (excluding all delays due to administra tive and regulatory requirements).
10
Dealing with Construction Permits data Doing Business 2008 Doing Business 2009 Doing Business 2010
Rank .. 182 182
Procedures (number) 54 54 54
Time (days) 704 704 704
Cost (% of income per capita) 3788.4 2612.7 2140.7
1. Historical data: Dealing with Construction Permits in the Russian Federation
2. The following graphs illustrates the Dealing with Construction Permits indicators in the Russian
Federation over the past 3 years:
11
3. Steps to Building a Warehouse in the Russian Federation
It requires 54 procedures, takes 704 days, and costs 2,140.69 % GNI per capita to build a warehouse in the Russian
Federation.
List of Procedures:
1. Submit application to obtain Act of Permission for Use
(АРИ) to Department of City Planning Documentation
Development at the Architecture and City Planning
Committee of Moscow (Moskomarchitectura).
2. Request and obtain Situation Plan of District and
Conclusion for a District Land Commission from
Architecture Planning Department (APD)
3. Request and obtain Conclusion from Territorial Union
of Land Use Regulation (TOPЗ)
4. Request and obtain Decision by District Land
Commission on Land Plot Provision and City Planning
Regulation
5. Request and obtain clearance of draft Disposition of
Prefect with Architecture Planning Department (APD)
6. Request and obtain clearance of draft Disposition of
Prefect with Local Government
7. Request and obtain clearance of draft Disposition with
Territory union of land use regulation (ТОРЗ)
8. Request and obtain the Disposition on Preparation of
Act of Permission for Use (АРИ) by Prefect.
9. Request and obtain Conclusion on compliance of
proposed object with specified city planning and
territory use regulations
10. Request and obtain technical conditions from water and
sewage services
11. Request and obtain technical conditions to connect to
electricity with MosEnergo
12. Request and obtain technical conditions to connect to
telephone line
13. Request and obtain approval from Moscomarchitectura
on engineering supply of the facility
14. Request and obtain Act of Permission for Use (АРИ)
from Committee on Architecture and City Planning –
Moscomarchitectura
15. Request and obtain Disposition of Prefect on Inception
of Construction Designing (Decision on Construction)
12
16. Request and obtain the approval of conditions for
designs by Department of Well-Being of
Moscomarchitectura
17. Request and obtain the approval of conditions for
designs by Department of Preparation of Project
Approvals of (No Suggestions)
18. Request and obtain approval of conditions for designs
by Local Government
19. Request and obtain approval of conditions for designs
by Prefect’s Office
20. Request and obtain approval of conditions for designs
by Emergency Situation and Civil Defense Department
21. Request and obtain approval of conditions for designs
by Moscow State Expertise
22. Request and obtain Act of Moscow Geological -
Geodesic Department
23. Request and obtain approval of conditions for designs
with Sanitary Services (Rospotrebnadzor)
24. Request and obtain the approval on transport routes
from Moscow City Transport Agency
25. Request and obtain the approval from State Inspection
of Road Safety (GIBBD)
26. Request and obtain the approval from Department of
Comprehensive Well-Being of City
27. Request and obtain the approval from Department of
Nature Use under State Ecological Expertise
28. Request and obtain Sketch No. 2 from Moscow
Geological Institute
29. Request and obtain approval of Sketch No. 2 with
Moscow Architecture Committee
30. Request and obtain the construction passport from
Moscow City Geological Unit
31. Request and obtain approval of Volumes of «Outline of
Construction Arrangement» and “GenPlan” from
Moscomarchitectura Committee
32. Request and obtain approval of Volumes of «Outline of
Construction Arrangement» and “GenPlan” from
Prefecture
33. Request and obtain approval of Volumes of «Outline of
Construction Arrangement» and “GenPlan” from
GenPlan Institute
34. Request and obtain Regulation No. 2 and Certificate of
approval of Architectural City Planning Decision.
35. Request and obtain approval on project by Moscow
State Expertise
36. Request and obtain Permission for construction
37. Receive inspection from Inspection on Architecture
and Construction Supervision during foundation works
38. Receive inspection from Inspection on Architecture
and Construction Supervision during structure works
39. Receive inspection from Inspection on Architecture
and Construction Supervision during engineering
works
40. Receive inspection by Union of Administrative
Technical Inspection (UATI) - I
41. Receive inspection by Union of Administrative
Technical Inspection (UATI) - II
42. Receive inspection by Union of Administrative
Technical Inspection (UATI) - III
43. Receive inspection by Union of Administrative
Technical Inspection (UATI) - IV
44. Receive inspection by Union of Administrative
Technical Inspection (UATI) - V
45. Receive inspection by Union of Administrative
Technical Inspection (UATI) - VI
46. Receive inspection by Union of Administrative
Technical Inspection (UATI) - VII
47. Connect to water services
48. Request and receive inspection from Energy
Supervision
49. Connect to electricity –sign agreement with
“Energosbyt”
50. Request and connect to telephone services
51. Request and convene Acceptance Commission
52. Request and receive the Disposition on operation of
building (Occupancy Permit)
53. Request and receive Plans from Bureau of Technical
Inventory (BTI)
54. Register the building after completion
13
More detail is included in the appendix.
4. Benchmarking Dealing with Construction Permits Regulations:
Russian Federation is ranked 182 overall for Dealing with Construction Permits.
Ranking of the Russian Federation in Dealing with Construction Permits - Compared to good practice and selected
economies:
14
Procedures
(number)
Time (days) Cost (% of
income per
capita)
Denmark 6
Qatar 0.6
Singapore 25
Good Practice
Economies
Russian Federation 54 704 2140.7
Selected Economy
Brazil 18 411 50.6
China 37 336 579.2
India 37 195 2394.9
Japan 15 187 19.3
Kazakhstan 37 211 119.7
Mexico 12 138 113.1
Comparator Economies
The following table shows Dealing with Construction Permits data for the Russian Federation compared to good practice
and comparator economies:
15
Economies worldwide have established a system of laws and institutions intended to protect workers and guarantee a minimum standard of living for its population. This system generally encompasses four bodies of law: employment, industr ia l re lations, social security and occupational health and safety laws. Employment regulations are needed to allow eff ic ient contracting between employers and workers and to protect workers from discriminatory or unfair treatment by employers. Doing Business measures f lexibility in the regulation of hir ing, working hours and dismissal in a manner consistent with the conventions of the International Labour Organization (ILO). An economy can have the most flexible labor regulations as measured by Doing Business while ra tifying and complying with all conventions directly relevant to the factors measured by Doing Business and with the ILO core labor standards. No economy can achieve a better score by failing to comply with these conventions. Governments a ll over the world face the challenge of finding the right balance between worker protection and labor market flexibility. But in developing countries especially, regulators of ten err to one extreme, pushing employers and workers into the informal sector. Analysis across economies shows that while employment regulation generally increases the tenure and wages of incumbent workers, overly rigid regulations may have undesirable side effects. These include less job creation, smaller company size , less investment in research and develop ment, and longer spells of unemployment and thus the obsolescence of skills, all of which may reduce productivity growth. Methodology Two measures are presented: a rigidity of employment index and a redundancy cost measure. The r igidity of employment in dex is the average of three sub-indices: difficulty of hiring, rigidity of hours and difficulty of redundancy. Each index takes values between 0 and 100, with higher values indicating more rigid regulation. The difficulty of hir ing index measures the flexi bility of contracts and the ratio of the minimum wage to the value added per worker. The rigidity of hours index covers restr ic tions on weekend and night work, requirements re lating to working time and the workweek taking into account legal provisions that refer specifically to small to medium-size companies in the manufacturing industry in which continuous operation is economically necessary, as well as mandated days of annual leave with pay. The difficulty of redundancy index covers workers’ legal protections against dismissal, including the grounds permitted for dismissal and procedures for dismissal ( individual and collective) : notif ication and approval requirements, retra ining or reassignment obligations and priority rules for dismissals and reemployme nt. The Redundancy cost indicator measures the cost of advance notice requirements, severance payments and penalties due when terminating a redundant worker, expressed in weeks of salary. Survey Case Study The business: is a limited liability company o perating in the manufacturing sector is located in the largest business city is 100% domestically owned has 60 employees
The company is a lso assumed to be subject to collective bargaining agreements in economies where such agreements cover more than half the manufactur ing sector and apply even to firms not party to them.
16
Employing Workers data Doing Business 2008 Doing Business 2009 Doing Business 2010
Rank .. 104 109
Redundancy costs (weeks of salary) 17 17 17
Rigidity of employment index (0-100) 38 38 38
1. Historical data: Employing Workers in the Russian Federation
2. The following graphs illustrates the Employing Workers indicators in the Russian Federation over
the past 3 years:
17
3. Benchmarking Employing Workers Regulations:
Russian Federation is ranked 109 overall for Employing Workers.
Ranking of the Russian Federation in Employing Workers - Compared to good practice and selected economies:
18
Rigidity of
employment
index (0-100)
Redundancy
costs (weeks
of salary)
Hong Kong, China* 0
New Zealand* 0
Good Practice
Economies
Russian Federation 38 17
Selected Economy
Brazil 46 46
China 31 91
India 30 56
Japan 16 4
Kazakhstan 17 9
Mexico 41 52
Comparator Economies
The following table shows Employing Workers data for the Russian Federation compared to good practice and comparator
economies:
* The following economies are also good practice economies for :
Rigidity of employment index (0-100): Australia, Brunei Darussalam, Kuwait, Marshall Islands,
Singapore, St. Lucia, Uganda, United States
Redundancy costs (weeks of salary): Denmark, Iraq, Marshall Islands, Micronesia, Fed. Sts., Palau,
Puerto Rico, Tonga, United States
19
Formal property titles help promote the transfer of land, encourage investment and give entrepreneurs access to formal credit markets. But a large share of property in developing economies is not formally registered. Informal titles cannot be used as secur ity in obtaining loans, which limits financing opportunities for businesses. Many governments have recognized this and started extensive property titling programs. But bringing assets into the formal sector is only par t of the story. The more difficult and costly it is to formally transfer property, the greater the chances that formalized titles will quickly become informal again. Eliminating unnecessary obstacles to registering and transferr ing property is therefore important for economic development. Effic ient property registra tion reduces transaction costs and helps to formalize property titles. Simple procedures to register property are a lso associated with greater perceived security of property rights and less corruption. That benefits a ll entrepreneurs, especially women, the young and the poor. The r ich have few problems protecting their property r ights. They can afford to invest in security systems and other measures to defend their property. But small entrepreneurs cannot. Reform can change this. Methodology Doing Business records the full sequence of procedures necessary for a business (buyer) to purchase a property from another business (seller) and to transfer the property title to the buyer’s name. The property of land and building will be tran sferred in its entire ty. The transaction is considered complete when the buyer can use the property as collateral for a bank loan. Local property lawyers and off ic ials in property registries provide information on required procedures as well as the time and cost to complete each one. For most economies the data are based on responses f rom both. Based on the responses, three indicators are constructed: number of procedures to register property time to register property ( in calendar days)
off ic ia l costs to register property (as a percentage of the property value)
Survey Case Study The buyer and seller: are limited liability companies are private nationals (no foreign ownership) are located in periurban area of the largest business c ity conduct general commercial activities The property:
consists of land and a 2 -story building (warehouse) is located in the periurban commercial zone of the largest business c ity The land area is 557.4 m 2 (6,000 square feet) . The warehouse has a total area of 929 m2 (10,000 square feet) .
has a value equal to 50 times income per capita The seller company owned the property for the last 10 years. is registered in the land registry and/or cadastre and is free of all disputes .
20
Registering Property data Doing Business 2008 Doing Business 2009 Doing Business 2010
Rank .. 49 45
Procedures (number) 6 6 6
Time (days) 52 52 43
Cost (% of property value) 0.3 0.2 0.1
1. Historical data: Registering Property in the Russian Federation
2. The following graphs illustrates the Registering Property indicators in the Russian Federation over
the past 3 years:
21
3. Steps to Registering Property in the Russian Federation
It requires 6 procedures, takes 43 days, and costs 0.13 % of property value to register the property in the Russian
Federation.
List of Procedures:
1. Seller obtains the cadastral passport at the Bureau of
Technical Inventory (BTI)
2. Seller obtains the cadastral passport at the Committee
for Land Resources and Land Management
3. Seller obtains the extracts from the Unified State
Register of Real Estate Property
4. Buyer or the seller obtains an extract from the Unified
State Register of Legal Entities containing the
information about the seller
5. Notarization of corporate documents by seller and
buyer
6. Registration of the transfer of the building and the land
plot at the State Registration Department
More detail is included in the appendix.
22
4. Benchmarking Registering Property Regulations:
Russian Federation is ranked 45 overall for Registering Property.
Ranking of the Russian Federation in Registering Property - Compared to good practice and selected economies:
23
Procedures
(number)
Time (days) Cost (% of
property
value)
New Zealand* 2
Norway* 1
Saudi Arabia 0.0
Good Practice
Economies
Russian Federation 6 43 0.1
Selected Economy
Brazil 14 42 2.7
China 4 29 3.1
India 5 44 7.4
Japan 6 14 5.0
Kazakhstan 5 40 0.1
Mexico 5 74 5.2
Comparator Economies
The following table shows Registering Property data for the Russian Federation compared to good practice and comparator
economies:
* The following economies are also good practice economies for :
Procedures (number): United Arab Emirates
Time (days): Saudi Arabia, Thailand, United Arab Emirates
24
Firms consistently ra te access to credit as among the greatest barriers to their operation and growth. Doing Business constructs two sets of indicators of how well credit markets function: one on credit registries and the other on legal rights of borrowers and lenders. Credit registr ies, institutions that collect and distribute credit information on borrowers, can greatly expand access to credit. By sharing credit information, they help lenders assess risk and allocate credit more efficiently. They also free entrepreneurs f rom having to rely on personal connections alone when trying to obtain credit . Methodology Credit information: three indicators are constructed: depth of credit information index, which measures the extent to
which the rules of a credit information system facilitate lending based on the scope of information distributed, the ease of access to information and the quality of information
public registry coverage, which reports the number of individuals and firms covered by a public credit re gistry as a percentage of the adult population
private bureau coverage, which reports the number of individuals and firms, covered by a pr ivate credit bureau as a percentage of the adult population
Legal Rights: the strength of legal rights index measures the degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders. Ten points are analyzed: Can a business use movable assets as colla teral while keeping
possession of the assets, and can any f inancial institution accept such assets as colla teral? Does the law allow a business to grant a non -possessory security right in a single category of revolving movable
assets, without requiring a specific description of the secured assets?
Does the law allow a business to grant a non pos sessory security r ight in substantia lly all of its assets, without requiring a specific descr iption of the secured assets?
Can a security right extend to future or after -acquired assets and extend automatically to the products, proceeds or replacements of the original assets?
Is general descr iption of debts and obligations permitted in collateral agreements and in registra tion documents, so that all types of obligations and debts can be secured by stating a maximum rather than a specific amount between the parties?
Is a collateral registry in operation that is unif ied geographically and by asset type as well as being indexed by the name of the grantor of a security right?
Are secured creditors paid first when a debtor defaults outside an insolvency procedure or when a business is liquidated?
Are secured creditors subject to an automatic stay or moratorium on enforcement procedures when a debtor enters a court-supervised reorganization procedure?
Are parties allowed to agree in a colla teral agreement that the lender may enforce its security right out of court? Legal Rights Survey Case Study The Debtor: is a Private Limited Liability Company
has its headquarters and only base of operations in the largest business c ity obtains a loan from a local bank (the Cred itor) for an amount up to 10 times income (GNI) per capita Both debtor and creditor are 100% domestically owned.
25
Getting Credit data Doing Business 2008 Doing Business 2009 Doing Business 2010
Rank .. 109 87
Strength of legal rights index (0-10) 3 3 3
Depth of credit information index (0-6) 4 4 5
Private bureau coverage (% of adults) 4.4 10.0 14.3
Public registry coverage (% of adults) 0.0 0.0 0.0
1. Historical data: Getting Credit in the Russian Federation
2. The following graphs illustrates the Getting Credit indicators in the Russian Federation over the
past 3 years:
26
3. Benchmarking Getting Credit Regulations:
Russian Federation is ranked 87 overall for Getting Credit.
Ranking of the Russian Federation in Getting Credit - Compared to good practice and selected economies:
27
Strength of
legal rights
index (0-10)
Depth of
credit
information
index (0-6)
Public
registry
coverage (%
of adults)
Private
bureau
coverage (%
of adults)
New Zealand* 100.0
Portugal 81.3
Singapore* 10
United Kingdom 6
Good Practice
Economies
Russian Federation 3 5 0.0 14.3
Selected Economy
Brazil 3 5 23.7 59.2
China 6 4 62.1 0.0
India 8 4 0.0 10.2
Japan 7 6 0.0 76.2
Kazakhstan 5 6 0.0 29.5
Mexico 4 6 0.0 77.5
Comparator Economies
The following table shows Getting Credit data for the Russian Federation compared to good practice and comparator
economies:
* The following economies are also good practice economies for :
Strength of legal rights index (0-10): Hong Kong, China, Kenya, Kyrgyz Republic, Malaysia
Private bureau coverage (% of adults): Argentina, Australia, Canada, Iceland, Ireland, Norway, Sweden,
United Kingdom, United States
27 countries have the highest credit information index.
28
Companies grow by raising capita l, e ither through a bank loan or by attracting equity investors. Selling shares allows companies to expand without the need to provide collateral and repay bank loans. However, investors worry about their money, and look for laws that protect them. A study finds that the presence of legal and regulatory protections for investors explains up to 73% of the decision to invest. In contrast, company character istics explain only between 4% and 22%*. Good protections for minority sh areholders are associated with larger and more active stock markets. Thus both governments and businesses have an interest in reforms strengthening investor protections. Methodology To document some of the protections investors have, Doing Business mea sures how economies regulate a standard case of self-dealing, use of corporate assets for personal gain. Three indices of investor protection are constructed based on the answers to these and other questions. All indices range from 0 to 10, with higher values indicating more protections or greater disclosure. The three indices are: The extent of disclosure index covers approval procedures,
requirements for immediate disclosure to the public and shareholders of proposed transactions, requirements for disclosure in periodic filings and reports and the availability of external review of transactions before they take place.
The extent of director liability index covers the ability of investors to hold Mr. James and the board of directors liable for damages, the ability to rescind the transaction, the availability of f ines and jail time associated with self -dealing, the availability of direct or derivative suits and the ability to require Mr. James to pay back his personal prof its from the transaction.
The ease of shareholder suits index covers the availability of documents that can be used during trial, the ability of the investor to examine the defendant and other witnesses, shareholders’ access to internal documents of the company, the appointment of an inspector to investigate the transaction and the standard of proof applicable to a civil suit against the directors.
These three indices are averaged to create the strength of investor protection index. Survey case study Mr. James, a director and the majority shareholder of a public company, proposes that the company purchase used trucks from another company he owns. The pr ice is higher than the going price for used trucks. The transaction goes forward. All required approvals are obtained, and all required disclosures made, though the transaction is prejudicial to the purchasing company. Shareholders sue the interested parties and the members of the board of directors. Several questions arise: Who approves the transaction? What information must be disclosed? What company documents can investors access? What do minority shareholders have to prove to get the transaction stopped or to receive compensation from
Mr. James? *Doidge, Kardyi and Stulz (2007)
29
Protecting Investors data Doing Business 2008 Doing Business 2009 Doing Business 2010
Rank .. 88 93
Strength of investor protection index (0-10) 5.0 5.0 5.0
1. Historical data: Protecting Investors in the Russian Federation
2. The following graph illustrates the Protecting Investors index in the Russian Federation compared
to best practice and selected Economies:
9.7
7.0
6.0
6.0
5.7
5.3
5.0
5.0
New
Zea
land
Japan
Mex
ico
India
Kaz
akhst
an
Brazi
l
Chin
a
Russ
ian
Feder
atio
n
Note: The higher the score, the greater the investor protection.
30
3. Benchmarking Protecting Investors Regulations:
Russian Federation is ranked 93 overall for Protecting Investors.
Ranking of the Russian Federation in Protecting Investors - Compared to good practice and selected economies:
31
Strength of
investor
protection
index (0-10)
New Zealand 9.7
Good Practice
Economies
Russian Federation 5.0
Selected Economy
Brazil 5.3
China 5.0
India 6.0
Japan 7.0
Kazakhstan 5.7
Mexico 6.0
Comparator Economies
The following table shows Protecting Investors data for the Russian Federation compared to good practice and comparator
economies:
32
Taxes are essentia l. Without them there would be no money to provide public amenities, infrastructure and services which are crucial for a properly functioning economy. But par ticularly for small and medium size companies, they may opt out and choose to op erate in the informal sector. One way to enhance tax compliance is to ease and simplify the process of paying taxes for such businesses. Methodology The Doing Business tax survey records the effective tax that a small and medium company must pay and the administra tive costs of doing so. Three indicators are constructed: number of tax payments, which takes into account the method
of payment, the frequency of payments and the number of agencies involved in our standardized case study.
time, which measures the number of hours per year necessary to prepare and file tax returns and to pay the corporate income tax, value added tax, sales tax or goods and service tax and labor taxes and mandatory contr ibutions.
total tax rate , which measures the amount of taxes and mandatory contr ibutions payable by the company during the second year of operation. This amount, expressed as a percentage of commercial profit, is the sum of a ll the different taxes payable after accounting for var ious deductions and exemptions.
Survey case study TaxpayerCo is a medium-size business that started operations last year . Doing Business asks tax practitioners in
183 economies to review TaxpayerCo’s financial statements and a standard list of transactions that the company completed during the year . Respondents are asked how much in taxes and mandatory contr ibutions the business must pay and what the process is for doing so.
The business star ts from the same financial position in each economy. All the taxes and mandatory contr ibutions paid during the second year of operation are recorded.
Taxes and mandatory contributions are measured at all levels of government and include corporate income tax, turnover tax, a ll labor taxes and contr ibutions paid by the company ( including mandatory contr ib utions paid to private pension or insurance funds) , property tax, property transfer tax, dividend tax, capita l gains tax, financial transactions tax, vehicle tax, sales tax and other small taxes (such as fuel tax, stamp duty and local taxes). A range of standard deductions and exemptions are also recorded.
33
Paying Taxes data Doing Business 2008 Doing Business 2009 Doing Business 2010
Rank .. 108 103
Total tax rate (% profit) 48.3 48.3 48.3
Payments (number per year) 11 11 11
Time (hours per year) 448 448 320
1. Historical data: Paying Taxes in the Russian Federation
2. The following graphs illustrates the Paying Taxes indicators in the Russian Federation over the
past 3 years:
34
3. Benchmarking Paying Taxes Regulations:
Russian Federation is ranked 103 overall for Paying Taxes.
Ranking of the Russian Federation in Paying Taxes - Compared to good practice and selected economies:
35
Payments
(number per
year)
Time (hours
per year)
Total tax rate
(% profit)
Maldives* 1 0
Timor-Leste 0.2
Good Practice
Economies
Russian Federation 11 320 48.3
Selected Economy
Brazil 10 2600 69.2
China 7 504 78.5
India 59 271 64.7
Japan 13 355 55.7
Kazakhstan 9 271 35.9
Mexico 6 517 51.0
Comparator Economies
The following table shows Paying Taxes data for the Russian Federation compared to good practice and comparator
economies:
* The following economies are also good practice economies for :
Payments (number per year): Qatar
36
The benefits of trade are well documented; as are the obstacles to trade. Tariffs, quotas and distance from large markets greatly increase the cost of goods or prevent trading altogether. But with bigger ships and faster planes, the world is shrinking. Glo bal and regional trade agreements have reduced trade barriers. Yet Africa’s share of global trade is smaller today than it was 25 years ago. So is the Middle East’s, excluding oil exports. Many entrepreneurs face numerous hurdles to exporting or importing goods, including delays at the border . They often give up. Others never try. In fact, the potential gains f rom trade facilitation may be greater than those ar ising from only tariff reductions. Methodology Doing Business compiles procedural requirements for trading a standard shipment of goods by ocean transport. Every procedure and the associated documents, time and cost, for importing and exporting the goods is recorded, star ting with the contractual agreement between the two parties and ending with delivery of the goods. For importing the goods, the procedures measured range from the vessel’s arr ival a t the port of entry to the shipment’s delivery at the importer’s warehouse. For exporting the goods, the procedures measured range from the packing of the goods at the factory to their departure from the port of exit. Payment is by le tter of credit and the time and cost for issuing or securing a le tter of credit is taken into account. Documents recorded include port filing documents, customs declaration and clearance documents, as well as offic ia l documents exchanged between the parties to the transaction. Time is recorded in calendar days, from the beginning to the end of each procedure. Cost includes the fees levied on a 20 -foot container in U.S. dollars . All the fees associated with completing the procedures to export or import the goods are included, such as costs for documents, administrative fees for customs clearance and technical control, terminal handling charges and inland transport. The cost measure does not include tar if fs or duties. Economies that have efficient customs, good transport networks and fewer document requirements, making compliance with export and import procedures faster and cheaper, are more competitive globally. That can lead to more exports; and exports are associated with faster growth and more jobs. Conversely, a need to f ile many documents is associated with more corruption in customs. Faced with long delays and frequent demands for bribes, many traders may avoid customs altogether. Instead, they smuggle goods across the border . This defeats the very purpose in having border control of trade to levy taxes and ensure high quality of goods. Survey case study To make the data comparable across countr ies, several assumptions about the business and the traded goods are used:
The business is of medium size . The business employs 60 people . The business is located in the per i-urban area of the economy’s largest business city . The business is a pr ivate, limited liability company, dom estically owned, formally registered and operating
under commercial laws and regulations of the economy. The traded goods are ordinary, legally manufactured products transported in a dry-cargo, 20-foot FCL (full
container load) container .
37
Trading Across Borders data Doing Business 2008 Doing Business 2009 Doing Business 2010
Rank .. 160 162
Cost to export (US$ per container) 1750 1850 1850
Cost to import (US$ per container) 1750 1850 1850
Documents to export (number) 8 8 8
Documents to import (number) 13 13 13
Time to export (days) 36 36 36
Time to import (days) 36 36 36
1. Historical data: Trading Across Borders in the Russian Federation
2. The following graphs illustrates the Trading Across Borders indicators in the Russian Federation
over the past 3 years:
38
3. Benchmarking Trading Across Borders Regulations:
Russian Federation is ranked 162 overall for Trading Across Borders.
Ranking of the Russian Federation in Trading Across Borders - Compared to good practice and selected economies:
39
Documents to
export
(number)
Time to
export (days)
Cost to
export (US$
per
container)
Documents to
import
(number)
Time to
import (days)
Cost to
import (US$
per
container)
Denmark* 5
France 2 2
Malaysia 450
Singapore 3 439
Good Practice
Economies
Russian Federation 8 36 1850 13 36 1850
Selected Economy
Brazil 8 12 1540 7 16 1440
China 7 21 500 5 24 545
India 8 17 945 9 20 960
Japan 4 10 989 5 11 1047
Kazakhstan 11 89 3005 13 76 3055
Mexico 5 14 1472 5 17 2050
Comparator Economies
The following table shows Trading Across Borders data for the Russian Federation compared to good practice and
comparator economies:
* The following economies are also good practice economies for :
Time to export (days): Estonia
40
Where contract enforcement is eff ic ient, businesses are more likely to engage with new borrowers or customers. Doing Business tracks the eff iciency of the judicial system in resolving a commercial dispute , following the step -by-step evolution of a commercial sale dispute before local courts. The data is collected through study of the codes of civil procedure and other court regulations as well as through surveys completed by local litigation lawyers (and, in a quarter of the countr ies, by judges as well). Justice delayed is of ten justice denied. And in many economies only the rich can afford to go to court. For the rest, justice is out of reach. In the absence of efficient courts, firms undertake fewer investments or business transactions. And they prefer to involve only a small group of people who know each other from previous dealings. Methodology Rankings on enforcing contracts are based on 3 sub-indicators: number of procedures, which are defined as any interaction
between the parties or between them and the judge or court off icer . This includes steps to f ile the case, steps for trial and judgment and steps necessary to enforce the judgment.
time, which counts the number of calendar days from the moment the Seller files the lawsuit in court until payme nt is received. This includes both the days on which actions take place and the waiting periods in between.
cost, which is recorded as a percentage of the claim (assumed to be equivalent to 200% of income per capita) . Three types of costs are recorded: court costs (including expert fees), enforcement costs (including costs for a public sale of Buyer’s assets) and attorney fees.
Survey case Study The dispute concerns a contract for the sale of goods between
two businesses (the Seller and the Buyer). Both are located in the economy’s largest business city.
The Seller sells and delivers goods, worth 200% of the economy’s income per capita , to the Buyer. The Buyer refuses to pay on the grounds that they were not of adequate quality.
The Seller sues the Buyer to recover the amount under the sales agreement (200% of the economy’s income per capita).
The claim is filed before a court in the economy’s largest business c ity with jurisdiction over commercial cases worth 200% of the income per capita and is disputed on the merits.
Judgment is 100% in favor of the Seller and is not appealed. The Seller enforces the judgment and the money is successfully collected through a public sale of Buyer’s
assets.
41
Enforcing Contracts data Doing Business 2008 Doing Business 2009 Doing Business 2010
Rank .. 19 19
Procedures (number) 37 37 37
Time (days) 281 281 281
Cost (% of claim) 13.4 13.4 13.4
1. Historical data: Enforcing Contracts in the Russian Federation
2. The following graphs illustrates the Enforcing Contracts indicators in the Russian Federation over
the past 3 years:
42
3. Benchmarking Enforcing Contracts Regulations:
Russian Federation is ranked 19 overall for Enforcing Contracts.
Ranking of the Russian Federation in Enforcing Contracts - Compared to good practice and selected economies:
43
Procedures
(number)
Time (days) Cost (% of
claim)
Bhutan 0.1
Ireland 20
Singapore 150
Good Practice
Economies
Russian Federation 37 281 13.4
Selected Economy
Brazil 45 616 16.5
China 34 406 11.1
India 46 1420 39.6
Japan 30 360 22.7
Kazakhstan 38 390 22.0
Mexico 38 415 32.0
Comparator Economies
The following table shows Enforcing Contracts data for the Russian Federation compared to good practice and comparator
economies:
44
The economic crises of the 1990s in emerging markets, from East Asia to Latin America, from Russia to Mexico, ra ised concerns about the design of bankruptcy systems and the ability of such systems to help reorganize viable companies and close down unviable ones. In countries where bankruptcy is ineffic ient, unviable businesses linger for years, keeping assets and human capita l from being reallocated to more productive uses. Bottlenecks in bankruptcy cut into the amount c la imants can recover . In countr ies w here bankruptcy laws are ineff ic ient, this is a strong deterrent to investment. Access to credit shrinks, and nonperforming loans and financial risk grow because creditors cannot recover overdue loans. Conversely, efficient bankruptcy laws can encourage entrepreneurs. The freedom to fail, and to do so through an eff ic ient process, puts people and capital to their most effective use. The result is more productive businesses and more jobs. The Doing Business indicators identify weaknesses in the bankruptcy l aw as well as the main procedural and administrative bottlenecks in the bankruptcy process. In many developing countries bankruptcy is so ineff ic ient that creditors hardly ever use it. In countries such as these, reform would best focus on improving contra ct enforcement outside bankruptcy. Methodology Three measures are constructed from the survey responses: the time to go through the insolvency process, the cost to go through the process and the recovery rate, how much of the insolvency estate is recovered by stakeholders, taking into account the time, cost, depreciation of assets and the outcome of the insolvency proceeding. Survey case study The data on closing a business are developed using a standard s et of case assumptions to track a company going through the step -by-step procedures of the bankruptcy process. It is assumed that:
the company is a domestically owned the company is a limited liability corporation operating a hotel
in the country’s largest business city the company has 201 employees, 1 main secured creditor and
50 unsecured creditors Assumptions are a lso made about the future cash f lows.
The case is designed so that the company has a higher value as a going concern, that is, the efficient outcome is either reorganization or sale as a going concern, not piecemeal liquidation.
The data are der ived from questionnaires answered by attorneys at private law f irms.
45
Closing a Business data Doing Business 2008 Doing Business 2009 Doing Business 2010
Rank .. 92 92
Time (years) 3.8 3.8 3.8
Cost (% of estate) 9 9 9
Recovery rate (cents on the dollar) 29.0 28.2 28.2
1. Historical data: Closing Business in the Russian Federation
2. The following graphs illustrates the Closing Business indicators in the Russian Federation over the
past 3 years:
46
3. Benchmarking Closing Business Regulations:
Russian Federation is ranked 92 overall for Closing a Business.
Ranking of the Russian Federation in Closing Business - Compared to good practice and selected economies:
47
Recovery rate
(cents on the
dollar)
Time (years) Cost (% of
estate)
Ireland 0.4
Japan 92.5
Singapore* 1
Good Practice
Economies
Russian Federation 28.2 3.8 9
Selected Economy
Brazil 17.1 4.0 12
China 35.3 1.7 22
India 15.1 7.0 9
Japan 92.5 0.6 4
Kazakhstan 40.6 1.5 15
Mexico 64.2 1.8 18
Comparator Economies
The following table shows Closing Business data for the Russian Federation compared to good practice and comparator
economies:
* The following economies are also good practice economies for :
Cost (% of estate): Colombia, Kuwait, Norway
48
Number of reforms in Doing Business 2010
Negative Reform
Positive Reform
Total
number
of
reformsEconomy
Clo
sin
g a
Bu
sin
ess
En
forc
ing
Con
tra
cts
Tra
din
g A
cro
ss B
ord
ers
Pa
yin
g T
ax
es
Pro
tect
ing
Inv
esto
rs
Get
tin
g C
red
it
Reg
iste
rin
g P
rop
erty
Em
plo
yin
g W
ork
ers
Dea
lin
g w
ith
Con
stru
ctio
n
Per
mit
s
Sta
rtin
g a
Bu
sin
ess
Ran
k
Rwanda 1 7
Kyrgyz Republic 2 7
Macedonia, FYR 3 7
Belarus 4 6
United Arab Emirates 5 3
Moldova 6 3
Colombia 7 8
Tajikistan 8 5
Egypt, Arab Rep. 9 4
Liberia 10 3
Russian Federation 3
Japan
Brazil 1
China 1
India 1
Mexico 2
Kazakhstan 3
Note: Economies are ranked on the number and impact of reforms, Doing Business selects the economies that reformed in 3
or more of the Doing Business topics. Second, it ranks these economies on the increase in rank in Ease of Doing Business
from the previous year. The larger the improvement, the higher the ranking as a reformer.
49
Belarus Belarus eased the process for getting construction permits by simplifying approval processes.
Restrictions relating to redundancy dismissals were eased by raising the threshold for prior notification
requirements. Tax payments were made more convenient through increased use of electronic
systems—reducing tax compliance times—while lower ecological and turnover tax rates and a
reduction in the number of payments for property tax reduced the tax burden on businesses. Property
registration continues to improve, with faster processing and elimination of the requirement for
notarization. Business start-up was eased by simplifying registration formalities, abolishing the
minimum capital requirement, limiting the role of notaries, and removing the need for a company seal
approval. Implementation of a risk-based management system and improvement of border crossing
operations reduced transit times for trade.
Brazil Brazil eased the process of starting a business by removing the requirement to obtain a fire brigade
license and inspection before obtaining an operational license from a municipality.
China China’s State Administration of Foreign Exchange relaxed trade credit restrictions in response to the
economic and financial crisis. Foreign exchange authorization is no longer required.
Colombia Colombia passed several decrees continuing its efforts to regulate the profession of insolvency
administrators. The government eased the construction permit process with a new construction decree
that categorizes building projects based on risk and allows electronic verification for certain documents.
Access to credit improved thanks to a new credit information law that guarantees the right of borrowers
to inspect their own data and new rules that make it mandatory for credit providers to consult and share
information with credit bureaus. The tax burden on businesses was eased with the introduction of
electronic tax filing and payment, and some payments were reduced. An amendment to the Company
Law strengthened investor protections by making it easier to sue directors in cases of prejudicial
transactions between interested parties. Property registration was made easier by making it possible to
obtain required certificates online and by making standard preliminary sale agreements available free of
charge. Business start-up was made easier by creating a public-private health provider that enables
faster affiliation of employees and through a tool that allows online pre-enrollment with the social
security office. Implementation of an electronic declaration system has expedited customs clearance.
Egypt, Arab Rep. The Arab Republic of Egypt, a former global leading reformer and a regional leading reformer in
2008/09, continued to make it easier to deal with construction permits by issuing executive articles for
the 2008 construction law and eliminating most preapprovals for construction permits. Contract
enforcement was expedited with the creation of commercial courts. Access to credit information has
expanded with the addition of retailers to the database of the private credit bureau. Finally, company
start-up was eased by the removal of the minimum capital requirement.
India In India procedures under the 2002 Securitization Act have become more effective, easing the process
and reducing the time required to close a business.
Japan In Japan no major reform was recorded.
Kazakhstan Kazakhstan has eased the process for getting construction permits by eliminating the requirement to pay
for new electrical connection, reducing time limits for building permits, and lowering the cost of
topographic surveys. The tax burden on companies was eased by lowering the social tax for 2008 and
the corporate income tax for 2009 (from 30 percent to 10 percent). Business start-up was made easier
by simplifying documentation requirements and abolishing the requirement to register at the local tax
office.
50
Kyrgyz Republic The Kyrgyz Republic eased the process for getting construction permits by streamlining the fee
structure, introducing a risk-based system of approval and building control, allowing low-risk projects
to conduct an internal building control process, and simplifying the process for obtaining utility
connections. Requirements relating to redundancy dismissals and worker reassignment were eased.
Access to credit was enhanced by making secured lending more flexible and allowing general
descriptions of encumbered assets and of debts and obligations. In addition, amendments to the Civil
Code provide for automatic extension of security rights to proceeds of the original assets. The tax
burden on businesses was eased by reducing the rates for several taxes and the number of payments for
several. Surveying and notarization requirements were made optional for property registration, and
business start-up was eased by eliminating the minimum capital requirement, reducing the registration
time, and abolishing various post-registration fees and the need to open a bank account before
registration. The elimination of six previously required documents and the simplification of inspection
procedures has sped up trading across borders.
Liberia Liberia eased the process for getting construction permits by lowering the permit fee and cost of
obtaining a power generator, abolishing the requirement to obtain a tax waiver certificate before
submitting documents to obtain a building permit, and making fixed telephone connections more
readily available for public use with the reopening of the national phone company. Business start-up
was eased by removing the need to obtain an environmental impact assessment when forming a general
trading company. The trade process was expedited by creating a one-stop shop bringing together
various ministries and agencies, and streamlining the inspection regime.
Macedonia, FYR The Former Yugoslav Republic of Macedonia has been reforming the construction permit process,
shortening waiting times but raising fees. Worker hiring was made more flexible by allowing greater
use of fixed-term contracts, easing restrictions on working hours, and making redundancy dismissals
more flexible. The public credit bureau increased its coverage by introducing a better database that
includes more information and by lowering the minimum loan threshold. Social security payments were
classified in five groups, and social security contribution rates reduced. Investor protections were
increased by regulating the approval of transactions between interested parties, increasing disclosure
requirements in annual reports, and making it easier to sue directors in cases of prejudicial transactions
between interested parties. Property registration was eased with the introduction of new time limits at
the real estate cadastre—reducing the average time to register a title deed by eight days—and a
non-encumbrance certificate can now be obtained from the real estate registry instead of through the
court. Business start-up was simplified by integrating procedures at a one-stop shop.
Mexico Mexico eased taxpaying by introducing electronic payment systems for payroll, property, and social
security taxes. Business start-up was eased by establishing an electronic platform for company
registration, substantially reducing the number of days for registration, and eliminating the requirement
to register with the statistical office.
Moldova Moldova lowered the rates for social security contributions paid by employers. Property registration
was simplified by eliminating the requirement for a cadastral sketch, reducing procedures from six to
five and days from 48 to 5. Business start-up was eased by implementing an expedited company
registration service.
Russian Federation The Russian Federation introduced several changes to its insolvency law to speed up liquidation and
strengthen the legal status of secured creditors. The corporate income tax rate was cut from 24 percent
to 20 percent. Property registration was expedited by introducing new documentation
requirements—such as cadastral passports—in lieu of inventory documents and cadastral maps.
51
Rwanda Rwanda improved the process for dealing with distressed companies with a new law aimed at
streamlining reorganization. Employing workers was made easier by abolishing the maximum duration
for fixed-term contracts and allowing unlimited renewals of such contracts, as well as by allowing
redundancy procedures to be more flexible, with consultation and notification of third parties no longer
required. Getting credit was made easier with a new secured transactions act and insolvency act to make
secured lending more flexible, allowing a wider range of assets to be used as collateral and a general
description of debts and obligations. In addition, out of court enforcement of collateral has become
available to secured creditors, who also now have top priority within bankruptcy. A new company law
has strengthened investor protections by requiring greater corporate disclosure, director liability, and
shareholder access to information. Property registration was simplified by decreasing the number of
days required to transfer a property. Business start-up was eased by eliminating a notarization
requirement; introducing standardized memorandums of association; enabling online publication;
consolidating name checking, registration fee payment, tax registration, and company registration
procedures; and shortening the time required to process completed applications. By implementing
administrative changes—such as increased operating hours and enhanced cooperation at the border,
along with the removal of some documentation requirements for importers and exporters—Rwanda has
improved trading times.
Tajikistan Tajikistan amended its insolvency law, aiming to reduce statutory time limits and the costs of
proceedings. Changes were introduced that simplified the construction permit process, reducing
procedures and time. A new law on credit histories improves access to credit information by creating a
private credit bureau. Investor protections were strengthened with amendments to the joint stock
company law, increasing disclosure requirements for transactions involving conflicts of interest,
allowing for greater director liability, and giving shareholders the chance to request that harmful
related-party transactions be rescinded. The state duty for property transfer has quadrupled, raising the
cost of registering property by 2.8 percent of a property’s value. Business start-up was eased by
reducing the minimum capital requirement and shortening the time to obtain a tax identification
number.
United Arab Emirates The United Arab Emirates shortened the time for delivering building permits by improving its online
system for processing applications. Business start-up was eased by simplifying the documents needed
for registration, abolishing the minimum capital requirement, and removing the requirement that proof
of deposit of capital be shown for registration. Greater capacity at the container terminal, elimination of
the terminal handling receipt as a required document, and an increase in trade finance products, have
improved trade processes.
52
Registration Requirements:
STANDARDIZED COMPANY
Legal Form: Private Limited Liability Company (OOO)
Minimum Capital Requirement:
City: Moscow
This table summarizes the procedures and costs associated with setting up a business in the Russian Federation.
Starting a Business in the Russian Federation
No: Procedure Time to complete Cost to complete
Notarize foundation documents 1 1 2600
Deposit capital in the bank and get proof thereof 2 1 0
Pay registration fee 3 1 0
Register with the unified register at the Federal Tax Service on the
local level, to obtain the single number of state registration and the
number of tax registration (identification number of taxpayer,INN);
register with the State Pension Fund, the State
4 18 2000
Notarize Registration Certificate, Tax Payer Identification Number
Certificate and Bank SignatureCard.
5 1 1200
Open the company bank account 6 1 0
Inform Federal Tax Service of the company bank account number and
obtain a special letter of confirmation
7 5 0
Register the company with Moscow Center of Quotation of Work
Places
8 1 0
Register seal with the local Registration Chamber 9 1 1750
APPENDICES
53
Procedure Notarize foundation documents 1
Time to complete: 1
Cost to complete: 2600
Comment: At least 4 copies of the following documents need to be notarized: copy of the charter,
copy of the decision of establishment of the limited liability company, copy of the
foundation agreement. In addition, the registration application must also be notarized.
Procedure Deposit capital in the bank and get proof thereof 2
Time to complete: 1
Cost to complete: 0
Comment: At least 50 per cent of the charter capital shall be paid before company incorporation. The
balance must be paid in the first year of operation. In order to open a bank account the
following documents are required: (i) application form, notarized copy of the charter; (ii)
notarized copy of the decision of establishment of the limited liability company; and (iii)
notarized copy of the foundation agreement. The deposit of the capital requires opening
an accumulative bank account for the name of the entity which is not created yet.
Depending on the bank, opening an account may take more than 1 day mostly because of
bank's client acceptance procedures.
Procedure Pay registration fee 3
Time to complete: 1
Cost to complete: 0
Comment: The registration fee must be paid for the registration of the legal entity with the State Tax
Inspectorate. Many applicants use Sberbank for paying the registration fee as the tax
authorities are familiar will the payment order issued by the Sberbank and in case of the
payment order issued by any other banks may request some additional confirmation that
the payment was actually completed. The registration fee of RUR 2,000 shall be
transferred to the account of the State Tax Inspectorate.
Procedure Register with the unified register at the Federal Tax Service on the local level, to obtain
the single number of state registration and the number of tax registration (identification
number of taxpayer,INN); register with the State Pension Fund, the State
4
Time to complete: 18
Cost to complete: 2000
Comment: As of January 1, 2004 the state registration of legal entities is conducted concurrently
with tax registration and registration with the State Pension Fund, the State Fund of Social
Insurance and the State Fund of Compulsory Medical Insurance ("Funds") through the
Federal Tax Service of the Russian Federation (former Ministry of Taxation) at the local
level. The coordination of the different registrations was delegated to the Federal Tax
Service. The newly established legal entity is granted a main state registration number
(OGRN) and the taxpayer's identification number (INN) with the relevant certificates.
The documents confirming the registration with the indicated Funds are delivered to the
newly established legal entity by mail. Should the company for some reason need
confirmation of its registration with the Funds immediately after the state registration, it
should apply to the Funds directly. Generally it takes 5 days to complete tax and state
registration and 1-2 days to obtain registration documents with the Fund for an already
54
registered legal entity (if the application was done in person by the founder). The time for
mail delivery may slow down the process for 2-4 weeks. Tax authorities now only directly
accept the documents for state registration when filed personally by one of the founders of
the company, otherwise the authorities require them to be mailed. If the documents are
filed personally by the founder it is possible to receive a registration certificate under the
power of attorney, otherwise the registration certificates are sent to the address of the
newly established company by regular mail, which takes longer.
Documents required for registration:
- Decision of the founders meeting;
- Charter (2 copies);
- Foundation agreement (2 copies);
- Registration Application, notarized;
- Payment receipt.
The tax authorities sometimes implement a number of requirements, and failure to comply
may lead to the rejection of the application. In addition, recently the tax authorities
stopped issuing the original of the Charter (Articles of Association) which is filed for the
state registration. Only a certified copy is issued. As a result, if the company has to file
the copy of the Charter with any other state authorities, another copy of the Charter has to
be requested by the tax authorities every time. The copy is usually issued within 5
working days and requires a payment of RUR 200 or RUR 400.
Procedure Notarize Registration Certificate, Tax Payer Identification Number Certificate and
Bank SignatureCard.
5
Time to complete: 1
Cost to complete: 1200
Comment: For a limited liability company with 50 employees, generally the General director and
Chief accountant have a signature right.
Required documents:
- Registration certificate, notarized;
- Taxpayer Identification Number (INN) certificate, notarized;
- Charter and foundation agreement, notarized;
- Documents confirming authority of the signatories (decision on the founders on
appointment/election of the Director etc.), notarized.
Procedure Open the company bank account 6
Time to complete: 1
Cost to complete: 0
Comment: The opening of the bank account may take 1-5 working days depending on the
requirements of particular bank in terms of client acceptance procedure. The bank may
require documents related to the founders of the newly established company and
investigate the founder's history and its financial status.
Procedure Inform Federal Tax Service of the company bank account number and obtain a special
letter of confirmation
7
Time to complete: 5
Cost to complete: 0
Comment: The procedure takes from 3 to 7 days and needs to be completed 10 days from date of
opening of bank account.
Procedure Register the company with Moscow Center of Quotation of Work Places 8
55
Time to complete: 1
Cost to complete: 0
Comment: The notification needs to be made within 30 days after the state registration. Registration
of companies with Moscow Center of Quotation of Work Places was introduced by the
Resolution of the Moscow Government No. 125-PP of March 4, 2003 "On Approval of
Regulation on Quotation of Work Places in the City of Moscow". Under Resolution No.
125-PP all companies and individual entrepreneurs employing personnel are required to
be registered with the Moscow Center of Quotation of Work Places having its local
departments in each district of Moscow irrespective of whether such companies are
obliged to comply with the quotas (if the staff represents more than 100 persons) or not.
Procedure Register seal with the local Registration Chamber 9
Time to complete: 1
Cost to complete: 1750
Comment:
56
Registration Requirements:
BUILDING A WAREHOUSE
Date as of: January 2009
Estimated Warehouse Value:
City: Moscow
The table below summarizes the procedures, time, and costs to build a warehouse in the Russian Federation.
Dealing with Construction Permits in the Russian Federation
No: Procedure Time to complete Cost to complete
1 Submit application to obtain Act of Permission for Use (АРИ) to
Department of City Planning Documentation Development at the
Architecture and City Planning Committee of Moscow
(Moskomarchitectura).
1 day no charge
2 Request and obtain Situation Plan of District and Conclusion for a District
Land Commission from Architecture Planning Department (APD)
15 days RUB 43,680
3 Request and obtain Conclusion from Territorial Union of Land Use
Regulation (TOPЗ)
15 days RUB 4,330
4 Request and obtain Decision by District Land Commission on Land Plot
Provision and City Planning Regulation
30 days no charge
5 Request and obtain clearance of draft Disposition of Prefect with
Architecture Planning Department (APD)
7 days no charge
6 Request and obtain clearance of draft Disposition of Prefect with Local
Government
7 days no charge
7 Request and obtain clearance of draft Disposition with Territory union of
land use regulation (ТОРЗ)
7 days no charge
8 Request and obtain the Disposition on Preparation of Act of Permission for
Use (АРИ) by Prefect.
7 days no charge
9 Request and obtain Conclusion on compliance of proposed object with
specified city planning and territory use regulations
152 days RUB 4,500
10 Request and obtain technical conditions from water and sewage services 45 days RUB 21,300*
11 Request and obtain technical conditions to connect to electricity with
MosEnergo
30 days RUB 5,490,520*
12 Request and obtain technical conditions to connect to telephone line 30 days RUB 3,000*
57
13 Request and obtain approval from Moscomarchitectura on engineering
supply of the facility
14 days RUB 4,500*
14 Request and obtain Act of Permission for Use (АРИ) from Committee on
Architecture and City Planning – Moscomarchitectura
30 days RUB 6,700
15 Request and obtain Disposition of Prefect on Inception of Construction
Designing (Decision on Construction)
60 days no charge
16 Request and obtain the approval of conditions for designs by Department
of Well-Being of Moscomarchitectura
7 days RUB 53,300
17 Request and obtain the approval of conditions for designs by Department
of Preparation of Project Approvals of (No Suggestions)
14 days RUB 12,100*
18 Request and obtain approval of conditions for designs by Local
Government
7 days no charge*
19 Request and obtain approval of conditions for designs by Prefect’s Office 14 days no charge*
20 Request and obtain approval of conditions for designs by Emergency
Situation and Civil Defense Department
14 days RUB 14,728*
21 Request and obtain approval of conditions for designs by Moscow State
Expertise
14 days RUB 7,364*
22 Request and obtain Act of Moscow Geological - Geodesic Department 15 days RUB 39,000*
23 Request and obtain approval of conditions for designs with Sanitary
Services (Rospotrebnadzor)
30 days RUB 13,800*
24 Request and obtain the approval on transport routes from Moscow City
Transport Agency
30 days RUB 8,837*
25 Request and obtain the approval from State Inspection of Road Safety
(GIBBD)
30 days RUB 8,837*
26 Request and obtain the approval from Department of Comprehensive
Well-Being of City
30 days RUB 4,600*
27 Request and obtain the approval from Department of Nature Use under
State Ecological Expertise
21 days RUB 29,455*
28 Request and obtain Sketch No. 2 from Moscow Geological Institute 30 days RUB 10,100
29 Request and obtain approval of Sketch No. 2 with Moscow Architecture
Committee
30 days RUB 4,000
58
30 Request and obtain the construction passport from Moscow City
Geological Unit
30 days RUB 8,837
31 Request and obtain approval of Volumes of «Outline of Construction
Arrangement» and “GenPlan” from Moscomarchitectura Committee
30 days no charge*
32 Request and obtain approval of Volumes of «Outline of Construction
Arrangement» and “GenPlan” from Prefecture
30 days no charge*
33 Request and obtain approval of Volumes of «Outline of Construction
Arrangement» and “GenPlan” from GenPlan Institute
30 days RUB 12,200*
34 Request and obtain Regulation No. 2 and Certificate of approval of
Architectural City Planning Decision.
30 days RUB 3,600
35 Request and obtain approval on project by Moscow State Expertise 60 days RUB 59,500
36 Request and obtain Permission for construction 10 days RUB 11,460
37 Receive inspection from Inspection on Architecture and Construction
Supervision during foundation works
1 day no charge
38 Receive inspection from Inspection on Architecture and Construction
Supervision during structure works
1 day no charge
39 Receive inspection from Inspection on Architecture and Construction
Supervision during engineering works
1 day no charge
40 Receive inspection by Union of Administrative Technical Inspection
(UATI) - I
1 day no charge
41 Receive inspection by Union of Administrative Technical Inspection
(UATI) - II
1 day no charge
42 Receive inspection by Union of Administrative Technical Inspection
(UATI) - III
1 day no charge
43 Receive inspection by Union of Administrative Technical Inspection
(UATI) - IV
1 day no charge
44 Receive inspection by Union of Administrative Technical Inspection
(UATI) - V
1 day no charge
45 Receive inspection by Union of Administrative Technical Inspection
(UATI) - VI
1 day no charge
46 Receive inspection by Union of Administrative Technical Inspection
(UATI) - VII
1 day no charge
47 Connect to water services 30 days no charge
59
48 Request and receive inspection from Energy Supervision 1 day no charge*
49 Connect to electricity –sign agreement with “Energosbyt” 14 days no charge
50 Request and connect to telephone services 10 days RUB 8,640*
51 Request and convene Acceptance Commission 30 days no charge
52 Request and receive the Disposition on operation of building (Occupancy
Permit)
10 days no charge
53 Request and receive Plans from Bureau of Technical Inventory (BTI) 30 days RUB 55,000
54 Register the building after completion 30 days RUB 7,500
* Takes place simultaneously with another procedure.
60
Procedure Submit application to obtain Act of Permission for Use (АРИ) to Department of City
Planning Documentation Development at the Architecture and City Planning Committee
of Moscow (Moskomarchitectura).
1
Time to complete: 1 day
Cost to complete: no charge
Comment:The Architecture and City Planning Committee of Moscow ( MoskomArchitektura)
enacted a resolution “On Measures to Improve the Quality of Pre-project
Documentation,” dated February 12, 2007, which requires that the application file include
a “city planning justification for location of separate objects” (GOVERNMENT of
Moscow, No. 629, dated August 13, 2002).
The resolution also calls for a one-stop shop to be established to expedite the application
process, but facility is not yet fully operational.
Procedure Request and obtain Situation Plan of District and Conclusion for a District Land
Commission from Architecture Planning Department (APD)
2
Time to complete: 15 days
Cost to complete: RUB 43,680
Comment:The Architecture Planning Department (APD) determines whether it is possible to build
on the plot of land in question.
Procedure Request and obtain Conclusion from Territorial Union of Land Use Regulation (TOPЗ) 3
Time to complete: 15 days
Cost to complete: RUB 4,330
Comment:The completed “conclusion” on land use is to be submitted to the District Land
Commission.
Procedure Request and obtain Decision by District Land Commission on Land Plot Provision and
City Planning Regulation
4
Time to complete: 30 days
Cost to complete: no charge
Comment:The District Land Commission meets once a week. But in practice, this procedure takes
30 days. A favorable decision by the commission is the basis for issuance of the Prefect’s
disposition.
Procedure Request and obtain clearance of draft Disposition of Prefect with Architecture Planning
Department (APD)
5
Time to complete: 7 days
Cost to complete: no charge
Comment:The chief architect of the district must endorse the draft disposition.
61
Procedure Request and obtain clearance of draft Disposition of Prefect with Local Government 6
Time to complete: 7 days
Cost to complete: no charge
Comment:The head of the local government endorses the draft disposition.
Procedure Request and obtain clearance of draft Disposition with Territory union of land use
regulation (ТОРЗ)
7
Time to complete: 7 days
Cost to complete: no charge
Comment:The head of the Territorial Union of Land Use Regulation must endorse the draft
disposition.
Procedures 1–6 takes place in the specified order.
Procedure Request and obtain the Disposition on Preparation of Act of Permission for Use (АРИ)
by Prefect.
8
Time to complete: 7 days
Cost to complete: no charge
Comment:
Procedure Request and obtain Conclusion on compliance of proposed object with specified city
planning and territory use regulations
9
Time to complete: 152 days
Cost to complete: RUB 4,500
Comment:One measure undertaken to improve the quality of the pre-project approval process is to
establish a one-stop shop, according to MoskomArchitektura Resolution No. 13, dated
February 12, 2007. However, this facility is not yet fully operational, and applicants must
frequently follow-up with different departments.
The statutory time limit is 60 days. In practice, this limit is never respected, and the
procedure takes up to 6 months on average.
The necessary documents are prepared in collaboration with the Main Architecture and
Planning Department (MAPD), which prepares the “conclusion on compliance of the
proposed object.” Sketch number 1 is part of this conclusion package, which must be
approved not only by the MAPD, but also by the Prefecture, the Moscow City Geological
Unit, the Design Institute (NII GenPlan), the Russian Consumer Supervision Board
(Rospotrebnadzor), the Department of Nature Use, the Emergency Department, the
Property Department, and the Fire Safety Department. After the approval of the
pre-project proposal, an approval by MoskomArchitekture is needed, according to
Regulation No. 1.
The application package should include the following documents:
- A specification of the allowed technical and economic indicators.
62
- Guarantee letter.
- Proof of ownership documents.
- Pre-project drawings with technical and economic indicators, and relevant calculations
and estimates, such as parking layout; green area mapping; topographic mapping at a
scale of 1:500 with the relevant engineering documents.
- Concurrence by the Prefecture of the district by guidelines of MoskomArchitektura on
compliance of the building with the specified city planning conditions.
- Proof of (advance) payment.
- Any other documents obtained at earlier stages.
Procedure Request and obtain technical conditions from water and sewage services 10
Time to complete: 45 days
Cost to complete: RUB 21,300
Comment:The technical conditions are defined by the Moscow water and the sewage departments.
The list of conditions may be obtained simultaneously with the act of permission for use.
Under Government Regulation No. 83 dated 13 February 2006, (1) a list of technical
conditions must be prepared by the local government when preparing the city
development plan of the land plot; (2) if the city development plan of the land plot does
not contain this information, the technical conditions as well as the information on
payment for connection to such services must be provided by the respective agency within
14 business days after receiving the request, however in practice it takes longer.
According to update fee schedule of Moscow State Unitary Enterprise “Vodokanal” for
2009, the fee for obtaining the technical conditions has been increased from RUB 17,673
to RUB 21,300.
Procedure Request and obtain technical conditions to connect to electricity with MosEnergo 11
Time to complete: 30 days
Cost to complete: RUB 5,490,520
Comment:Technical conditions are determined by MosEnergo. The list of conditions may be
obtained simultaneously with the act of permission for use.
Under Government Regulation No. 83 dated 13 February 2006, (1) a list of technical
conditions must be prepared by the local government when preparing the city
development plan of the land plot; (2) if the city development plan of the land plot does
not contain this information, the technical conditions as well as the information on
payment for connection to such services must be provided by the respective agency within
14 business days after receiving the request, however in practice it takes longer.
Since August 5, 2006, Disposition No. 18 of the Regional Energy Commission of
Moscow City requires that companies purchase the right to connect to the electricity
network within the city of Moscow at a cost of RUB 39,218 (equivalent to USD 1,445)
per kilowatt. This means that the total cost in this case is 140 kilowatts х USD 1,445 =
USD 202,337.
This measure was introduced to offset the high demand for electricity in Moscow.
Procedure Request and obtain technical conditions to connect to telephone line 12
Time to complete: 30 days
63
Cost to complete: RUB 3,000
Comment:Technical conditions are set by the district telephone network services, which are either
branches of the Moscow City Telephone Service (MGTS) or private operators like
Komstar or Sovintel. The list of conditions can be obtained simultaneously with the act of
permission for use.
Procedure Request and obtain approval from Moscomarchitectura on engineering supply of the
facility
13
Time to complete: 14 days
Cost to complete: RUB 4,500
Comment:
Procedure Request and obtain Act of Permission for Use (АРИ) from Committee on Architecture
and City Planning – Moscomarchitectura
14
Time to complete: 30 days
Cost to complete: RUB 6,700
Comment:All city planning documents must conform to the norms and standards set by the local
government, relevant territorial executive authorities, and architectural institutions.
The documents are subject to an internal, ecological, evaluation and are approved by the
government of Moscow, provided that all necessary conclusions have been completed by
the relevant expert bodies. The approved documents are registered (internally) at the city
planning cadastre of Moscow. The department in charge of preparing the city planning
documentation provides the original blueprints of the act of permission for use of the
specified construction site to MoskomArchitecktura Archives, after approval by the City
Planning Cadastre Service.
The authority, internally, sends the prepared documents to all relevant bodies, which must
issue their conclusions within 15 working days.
Procedure Request and obtain Disposition of Prefect on Inception of Construction Designing
(Decision on Construction)
15
Time to complete: 60 days
Cost to complete: no charge
Comment:The decision on construction is a prerequisite for beginning to collect all design
documents. By law, obtaining the decision should not take more than 30 days. However,
the deadline is never respected, and this procedure takes 60 days on average.
Procedure Request and obtain the approval of conditions for designs by Department of Well-Being
of Moscomarchitectura
16
Time to complete: 7 days
Cost to complete: RUB 53,300
Comment:BuildCo prepares the design conditions, which consist of the major characteristics of the
future building.
64
Procedure Request and obtain the approval of conditions for designs by Department of Preparation
of Project Approvals of (No Suggestions)
17
Time to complete: 14 days
Cost to complete: RUB 12,100
Comment:The seal of the Department of Preparation of Project Approvals of MoskomArchitektura
is placed on the cover page of the conditions list.
Procedure Request and obtain approval of conditions for designs by Local Government 18
Time to complete: 7 days
Cost to complete: no charge
Comment:The seal of the local government is placed on the cover page of the conditions list.
Procedure Request and obtain approval of conditions for designs by Prefect’s Office 19
Time to complete: 14 days
Cost to complete: no charge
Comment:The seal of the local government is placed on the cover page of the conditions list.
Procedure Request and obtain approval of conditions for designs by Emergency Situation and Civil
Defense Department
20
Time to complete: 14 days
Cost to complete: RUB 14,728
Comment:The Emergency Situation Department specifies whether a shelter for civil defense must be
constructed on the site.
Procedure Request and obtain approval of conditions for designs by Moscow State Expertise 21
Time to complete: 14 days
Cost to complete: RUB 7,364
Comment:
Procedure Request and obtain Act of Moscow Geological - Geodesic Department 22
Time to complete: 15 days
Cost to complete: RUB 39,000
65
Comment:The applicant obtains a geodesic map of the plot with all communication lines indicated
and analyzed.
As of January 1, 2009, the fee for obtaining a geodesic map of the plot from the Moscow
Geological –Geodesic Department has increased from RUB 36,700 to RUB 39,000.
Procedure Request and obtain approval of conditions for designs with Sanitary Services
(Rospotrebnadzor)
23
Time to complete: 30 days
Cost to complete: RUB 13,800
Comment:The Sanitary Services (Rospotrebnadzor) analyze the drawings and designs according to
sanitary norms and conditions.
Procedure Request and obtain the approval on transport routes from Moscow City Transport
Agency
24
Time to complete: 30 days
Cost to complete: RUB 8,837
Comment:The Moscow City Transport Agency analyzes the drawings and designs according to the
norms and conditions for main and adjacent roads.
Procedure Request and obtain the approval from State Inspection of Road Safety (GIBBD) 25
Time to complete: 30 days
Cost to complete: RUB 8,837
Comment:The State Inspectorate of Road Safety (GIBBD) analyzes the drawings and designs
according to its norms and conditions.
Procedure Request and obtain the approval from Department of Comprehensive Well-Being of
City
26
Time to complete: 30 days
Cost to complete: RUB 4,600
Comment:The Department of Comprehensive Well-Being of the city analyses the drawings and
designs according to its norms and conditions.
Procedure Request and obtain the approval from Department of Nature Use under State Ecological
Expertise
27
Time to complete: 21 days
Cost to complete: RUB 29,455
Comment:The Department of Nature Use analyzes the drawings and designs according to its norms
and conditions.
66
Procedure Request and obtain Sketch No. 2 from Moscow Geological Institute 28
Time to complete: 30 days
Cost to complete: RUB 10,100
Comment:Sketch No. 2 is prepared by the Moscow Geological Institute (Mosgorgeotrest).
Procedure Request and obtain approval of Sketch No. 2 with Moscow Architecture Committee 29
Time to complete: 30 days
Cost to complete: RUB 4,000
Comment:On the Sketch No. 2 prepared by the Moscow Geological Institute, the Moscow
Architecture Committee (MoskomArchitektura) draws the communication lines and
power grids in accordance with the technical conditions obtained from the company.
Procedure Request and obtain the construction passport from Moscow City Geological Unit 30
Time to complete: 30 days
Cost to complete: RUB 8,837
Comment:Based on the approved Sketch No. 2, the Moscow City Geological Institute prepares the
passport that is later submitted to the State Inspectorate of Architecture and Construction
Supervision.
Procedure Request and obtain approval of Volumes of «Outline of Construction Arrangement» and
“GenPlan” from Moscomarchitectura Committee
31
Time to complete: 30 days
Cost to complete: no charge
Comment: According to Decree of Moscow Government, as of September 2, 2008 "On the rules of
the preparing, forming and confirmation of the Town-planning plans of the land plots in
the territory of the Russian Federation", the fee for obtaining approval of volumes of
“Outline of Construction Arrangement” was eliminated. Previously it used to cost RUB
6,500.
Procedure Request and obtain approval of Volumes of «Outline of Construction Arrangement» and
“GenPlan” from Prefecture
32
Time to complete: 30 days
Cost to complete: no charge
Comment:
Procedure Request and obtain approval of Volumes of «Outline of Construction Arrangement» and
“GenPlan” from GenPlan Institute
33
Time to complete: 30 days
Cost to complete: RUB 12,200
67
Comment:
Procedure Request and obtain Regulation No. 2 and Certificate of approval of Architectural City
Planning Decision.
34
Time to complete: 30 days
Cost to complete: RUB 3,600
Comment:The following documents must be submitted to obtain Regulation No. 2 at the
MoskomArchitektura:
- Architecture and construction designs and drawings.
- Approved (by all instances) designs and drawings of the general plan (as mentioned in
previous procedures).
- Approved design conditions.
- Decision on construction.
Procedure Request and obtain approval on project by Moscow State Expertise 35
Time to complete: 60 days
Cost to complete: RUB 59,500
Comment:The Moscow State Expertise relies on internal expertise. In accordance with the Moscow
Government regulation “Regulation of the document preparation by the “Moscow State
Expertise” № 670, dated 29 July 2008 should be no more than 60 days and is conducted
regardless of project size. As of December 2008, the fee for issuing project approval was
increased from RUB 58,000 to RUB 59,500.
Procedure Request and obtain Permission for construction 36
Time to complete: 10 days
Cost to complete: RUB 11,460
Comment:To obtain the building permit, BuildCo must submit the following documents to the
Moscow State Committee of Construction Supervision:
- An application form.
- Documents confirming title to the land.
- Town (planning) plan of land.
- Relevant project documentation.
After reforms in 2006, the statutory time line of issuing the permit fell from 30 days to 10.
The cost is 1% of the of the project’s value as designed.
Procedure Receive inspection from Inspection on Architecture and Construction Supervision
during foundation works
37
Time to complete: 1 day
Cost to complete: no charge
Comment:Construction activities are not interrupted during inspections. These inspections need not
be requested.
The first inspection takes place during foundation construction.
Procedure Receive inspection from Inspection on Architecture and Construction Supervision
during structure works
38
68
Time to complete: 1 day
Cost to complete: no charge
Comment:Construction activities are not interrupted during inspections. These inspections need not
be requested.
The second inspection takes place during structure construction.
Procedure Receive inspection from Inspection on Architecture and Construction Supervision
during engineering works
39
Time to complete: 1 day
Cost to complete: no charge
Comment:Construction activities are not interrupted during inspections. These inspections need not
be requested. The third inspection takes place during engineering work
Procedure Receive inspection by Union of Administrative Technical Inspection (UATI) - I 40
Time to complete: 1 day
Cost to complete: no charge
Comment:Construction activities are not interrupted during inspections. These inspections need not
be requested and take place at least once a month during the construction cycle. The
Union of Administrative Technical Inspection (UATI) inspects whether the construction
boundaries have remained the same.
Procedure Receive inspection by Union of Administrative Technical Inspection (UATI) - II 41
Time to complete: 1 day
Cost to complete: no charge
Comment:Construction activities are not interrupted during inspections. These inspections need not
be requested and take place at least once a month during the construction cycle. The
UATI inspects whether the construction boundaries have remained the same.
Procedure Receive inspection by Union of Administrative Technical Inspection (UATI) - III 42
Time to complete: 1 day
Cost to complete: no charge
Comment:Construction activities are not interrupted during inspections. These inspections need not
be requested and take place at least once a month during the construction cycle. The
UATI inspects whether the construction boundaries have remained the same.
Procedure Receive inspection by Union of Administrative Technical Inspection (UATI) - IV 43
Time to complete: 1 day
Cost to complete: no charge
Comment:Construction activities are not interrupted during inspections. These inspections need not
be requested and take place at least once a month during the construction cycle. The
UATI inspects whether the construction boundaries have remained the same.
69
Procedure Receive inspection by Union of Administrative Technical Inspection (UATI) - V 44
Time to complete: 1 day
Cost to complete: no charge
Comment:Construction activities are not interrupted during inspections. These inspections need not
be requested and take place at least once a month during the construction cycle. The
UATI inspects whether the construction boundaries have remained the same.
Procedure Receive inspection by Union of Administrative Technical Inspection (UATI) - VI 45
Time to complete: 1 day
Cost to complete: no charge
Comment:Construction activities are not interrupted during inspections. These inspections need not
be requested and take place at least once a month during the construction cycle. The
UATI inspects whether the construction boundaries have remained the same.
Procedure Receive inspection by Union of Administrative Technical Inspection (UATI) - VII 46
Time to complete: 1 day
Cost to complete: no charge
Comment:Construction activities are not interrupted during inspections. These inspections need not
be requested and take place at least once a month during the construction cycle. The
UATI inspects whether the construction boundaries have remained the same.
Procedure Connect to water services 47
Time to complete: 30 days
Cost to complete: no charge
Comment:An agreement must be concluded between BuildCo and the Water and Sewerage
Services. The connection to water service is then installed.
Procedure Request and receive inspection from Energy Supervision 48
Time to complete: 1 day
Cost to complete: no charge
Comment:After the inspection, the agency issues an act of permission, which is the basis for
connecting to electricity.
Procedure Connect to electricity –sign agreement with “Energosbyt” 49
Time to complete: 14 days
Cost to complete: no charge
Comment:BuildCo signs an agreement for electrical power supply with Energosbyt.
70
Procedure Request and connect to telephone services 50
Time to complete: 10 days
Cost to complete: RUB 8,640
Comment:According to Decree # 312, as of February 27, 2009 by Moscow City Telephone Network
Company the cost of connection works is now RUB 8,640 and done in 10 days.
Procedure Request and convene Acceptance Commission 51
Time to complete: 30 days
Cost to complete: no charge
Comment:BuildCo files application forms with the Moscow State Committee of Construction
Supervision in order to convene the Approval Commission. The commission includes
representatives from different backgrounds, such as ecology, the prefecture, the local
government, the sanitary services, the company, and the designer. After the commission
has convened, BuildCo collects the signatures of all its members.
The time line established by Government of Moscow Resolution No. 530, dated
November 7, 2001, for the relevant authorities to appoint representatives to the Approval
Commission is 10 days. The time required for approval of the building depends on the
state of the building (whether it is ready to be occupied or not) and on the inspection
results. In practice, this takes on average 30 days. The most difficult part is to convene the
commission members and gather their signatures for approval.
Procedure Request and receive the Disposition on operation of building (Occupancy Permit) 52
Time to complete: 10 days
Cost to complete: no charge
Comment:Obtaining an occupancy permit takes 10 days.
Procedure Request and receive Plans from Bureau of Technical Inventory (BTI) 53
Time to complete: 30 days
Cost to complete: RUB 55,000
Comment:
Procedure Register the building after completion 54
Time to complete: 30 days
Cost to complete: RUB 7,500
Comment:According to the Russian Federation Civil Code, the right to own and "create" immovable
things, including buildings, is subject to state registration at the Unified State Register by
the justice agencies. The procedure for state registration is established by the law and
71
encompasses registration of the rights to immovable property, and the associated
transactions.
To complete the registration, BuildCo must submit an application (which is a constitutive
document), the real property plan, and approval of the building, confirming the fact that
real property has been created. The state registration must be processed within a month of
the application date. Payment of a duty is required for registration. The amount of the
duty is determined by the local authorities. The maximum duty is established by the
Russian government at RUR 7,500 for legal persons.
72
Employing Workers in the Russian Federation
Employing workers indices are based on responses to survey questions. The table below shows these responses in the Russian
Federation.
Employing Workers Indicators (2009) Answer Score
33.3Difficulty of hiring index (0-100)
Are fixed-term contracts prohibited for permanent tasks? Yes 1
What is the maximum duration of fixed-term contracts (including renewals)? (in months) 60 0.0
What is the ratio of mandated minimum wage to the average value added per worker? 0.13 0.00
40.0Difficulty of redundancy index (0-10)
Is the termination of workers due to redundancy legally authorized? Yes 0
Must the employer notify a third party before terminating one redundant worker? Yes 1
Does the employer need the approval of a third party to terminate one redundant worker? No 0
Must the employer notify a third party before terminating a group of 9 redundant workers? Yes 1
Does the employer need the approval of a third party to terminate a group of 9 redundant
workers?
No 0
Is there a retraining or reassignment obligation before an employer can make a worker
redundant?
Yes 1
Are there priority rules applying to redundancies? Yes 1
Are there priority rules applying to re-employment? No 0
17.3Redundancy costs (weeks of salary)
What is the notice period for redundancy dismissal after 20 years of continuous
employment? (weeks of salary)
8.7
What is the severance pay for redundancy dismissal after 20 years of employment? (weeks of
salary)
8.7
What is the legally mandated penalty for redundancy dismissal? (weeks of salary) 0.0
37.8Rigidity of employment index (0-100)
40.0Rigidity of hours index (0-100)
Can the workweek extend to 50 hours (including overtime) for 2 months per year to
respond to a seasonal increase in production?
Yes 0
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What is the maximum number of working days per week? 6 0
Are there restrictions on night work and do these apply when continuous operations are
economically necessary?
No 1.00
Are there restrictions on "weekly holiday" work and do these apply when continuous
operations are economically necessary?
No 0.00
What is the paid annual vacation (in working days) for an employee with 20 years of
service?
22 1
Note: The first three indices measure how difficult it is to hire a new worker, how rigid the regulations are on working hours, and how
difficult it is to dismiss a redundant worker. Each index assigns values between 0 and 100, with higher values representing more rigid
regulations. The overall Rigidity of Employment Index is an average of the three indices.
74
STANDARDIZED PROPERTY Property Value: 13,900,608.48
City: Moscow
This topic examines the steps, time, and cost involved in registering property in the Russian Federation.
Registering Property in the Russian Federation
No: Procedure Time to complete Cost to complete
1 Seller obtains the cadastral passport at the Bureau of
Technical Inventory (BTI)
10 days (simultaneous
with procedures 2, 3,
and 4)
RUB 1,830.94*
2 Seller obtains the cadastral passport at the Committee for
Land Resources and Land Management
10 days (simultaneous
with procedures 1, 3,
and 4)
RUB 100*
3 Seller obtains the extracts from the Unified State Register
of Real Estate Property
7 days (simultaneous
with procedures 1, 2,
and 4)
RUB 300 per extract (legal
entities)
*
4 Buyer or the seller obtains an extract from the Unified State
Register of Legal Entities containing the information about
the seller
7 days (regular
procedure) or 1 day
(expedited procedure)
(simultaneous with
procedures 1, 2, and 3)
RUB 200 (regular
procedure) or RUB 400
(expedited procedure)
*
5 Notarization of corporate documents by seller and buyer 1-2 days RUB 500
6 Registration of the transfer of the building and the land plot
at the State Registration Department
30 days RUB 7,500 (building) +
RUR 7,500 (land plot
transfer)
* Takes place simultaneously with another procedure.
Registration Requirements:
75
Procedure Seller obtains the cadastral passport at the Bureau of Technical Inventory (BTI) 1
Time to complete: 10 days (simultaneous with procedures 2, 3, and 4)
Cost to complete: RUB 1,830.94
Comment: The seller should obtain technical inventory document –the cadastral passport – from the
local bureau of technical inventory. As of May 13, 2008 per the changes in the Federal
Law No. 66-FZ, inventory documents and cadastral maps were replaced by cadastral
passports. The only technical inventory document obtained from the bureau of technical
inventory is a cadastral passport. This document replaces the previously required three
documents: extract from the technical passport, floor plan and explanation of the floor
plan. The cost for this document is…..
The documentation shall include:
Application (standard form)
The document certifying rights of the seller to the property (must be in possession of the
seller)
A letter of guarantee (with respect to payments for BTI services)
An official document confirming applicant's authority to act on behalf of a legal entity
(i.e. power of attorney and passport of the applicant)
A document showing the legal boundaries of the property (i.e. to ensure that there are no
unauthorized alterations or modifications).
Under Clause 28 of the New Competition Law (dated 26 July 2006) the buyer must obtain
preliminary approval of the Federal Antimonopoly Service (the FAS) for an acquisition of
real estate property if the book value of the real estate property being acquired exceeds
20% of the book value of fixed and intangible assets of the seller, provided that (i) the
aggregate value of assets of the buyer, according to its latest financial statements and the
seller (group of the seller) exceeds three billion roubles (currently approximately US$83
mln); or (ii) their aggregate proceeds from the sale of products (works, services) for the
last calendar year exceeds six billion roubles (currently approximately US$167 mln) and,
at the same time, the value of assets as per the latest financial statements of the seller
exceeds one hundred fifty million roubles (currently approximately US$4.2 mln); or (iii)
either the buyer or the seller is included in the register of business entities as having a
market share of a particular product (work or service) of more than 35% .
The FAS must be notified about the purchase of real estate property by the buyer if the
aggregate assets value, according to the latest financial statements of the buyer and the
seller, or their aggregate proceeds from the sale of products (works, services) for the
calendar year preceding the year of acquisition of real estate property or other actions,
exceeds two hundred million roubles (currently approximately US$5.6 mln); and, at the
same time, the aggregate assets' value according to the latest financial statements of the
seller (group of the seller) exceeds thirty million roubles (currently approximately US$0.8
mln)
The antimonopoly permission is not necessary for the state registration of the transfer of
title to the property in Procedure 6, but its absence may lead to recognizing the
transaction as void.
NOTE: Due to the recent changes in the Russian antimonopoly legislation, such would
normally apply to major transactions and would not be necessary for small and medium
transactions such as the one described in this case study. It would take about one month
and cost the equivalent of 100 minimum wages.
The documentation shall include:
Application (standard form)
Other documents specified in the governmental regulations
76
Procedure Seller obtains the cadastral passport at the Committee for Land Resources and Land
Management
2
Time to complete: 10 days (simultaneous with procedures 1, 3, and 4)
Cost to complete: RUB 100
Comment: As of May 13, 2008 per the changes in the Federal Law No. 66-FZ, the cadastral plan of
land plot was replaced by cadastral passport of land plot The cadastral passport contains
the information on the land plot that entered to the state cadastre of immovable property.
As the Federal Agency for cadastre of immovable property is being a holder of state
cadastre of immovable property, this Agency and its territorial bodies issue cadastral
passport to land plot.
As the information entered to the state cadastre of immovable property is publicly
available, this information shall be provided by the Federal Agency for cadastre of
immovable property on requests of any persons. Therefore only application and the
passport of applicant are required for the purpose of obtaining of cadastral passport of
land plot.
The cost of provision of cadastral passport is not stipulated as of March 2009. According
to the Federal Law No. 221-FZ "On State Cadastre of Real Property" a state duty shall be
charged in accordance with the laws of the Russian Federation on taxes and fees (i.e. its
amount should be defined in the Tax Code of Russia). However this amount is not
stipulated up to date. Therefore the information from the state cadastre of immovable
property provides free of cost until the amount of state duty will be defined by provision
of Tax Code.
Procedure Seller obtains the extracts from the Unified State Register of Real Estate Property 3
Time to complete: 7 days (simultaneous with procedures 1, 2, and 4)
Cost to complete: RUB 300 per extract (legal entities)
Comment: A non-encumbrance certificate on the property must be obtained from the Unified State
Register of Real Estate Property maintained by the State Registration Department of
Rights to the Real Estate Property. The cost of the extract is RUB 100 for individuals and
RUB 300 for legal entities.
Procedure Buyer or the seller obtains an extract from the Unified State Register of Legal Entities
containing the information about the seller
4
Time to complete: 7 days (regular procedure) or 1 day (expedited procedure) (simultaneous with procedures
1, 2, and 3)
Cost to complete: RUB 200 (regular procedure) or RUB 400 (expedited procedure)
Comment: A certificate containing information about the seller can be obtained from the Unified
State Register of Legal Entities maintained by Federal Service of the Russian Federation
on Taxes and Duties. Although the expedited procedure is not defined by law, it is widely
practiced by most branches of Russian Tax Authorities – keepers of the Unified State
Register for Legal Entities.
Procedure Notarization of corporate documents by seller and buyer 5
Time to complete: 1-2 days
77
Cost to complete: RUB 500
Comment: The seller should obtain notarized copies of the certificate on state registration of
ownership title on the building as well as the certificate of ownership. The buyer and
seller should obtain notarized copies of the certificate of LLC state registration, the
charter, the foundation agreement, the certificate on individual taxpayer numbers, and the
informational letter of State Committee on Statistics. Notarization costs about 500 RUR
for each document (RUB 10 per page) with a state notary, whatever rates are established
by a private notary.
The documentation shall include:
Certificate on state registration of ownership title to the building and certificate on state
registration of ownership title to the land plot (Obtained in Procedure 3).
Certificate of LLC state registration, the charter, the foundation agreement, the certificate
on individual number of a taxpayer, and the informational letter of state committee on
statistics (must be in possession of the buyer and seller).
Procedure Registration of the transfer of the building and the land plot at the State Registration
Department
6
Time to complete: 30 days
Cost to complete: RUB 7,500 (building) + RUR 7,500 (land plot transfer)
Comment: The documents obtained in procedures 1, 2, 3, and 5 shall be presented to the Moscow
Department of the State Registration Service.
According to the law, state registration is implemented in the following order:
- acceptance of registration documents
- legal scrutiny of documents and examination of the lawfulness of the agreement
- clarification of the grounds for refusal or suspension of state registration
- entry to the registry in case there are no grounds for refusal, or suspension of state
registration
- notes on the title documents and issuance of certificates regarding implemented state
registration
As of January 2005, the Order of the Ministry of Justice No. 4 allowed for the possibility
of expedited registration procedures. However, this Order was merely an advisory
document and not intended to establish official expedited procedures. Moscow does not
have a law in place that grants expedited procedures. Instead, there are private,
commercial organizations which offer expedited services – however, their services may
be limited (for example, servicing only certain areas) and costly. These services are not
widely used.
Current legislation imposes on the seller an 18 percent VAT on the sale of property.
However, sale of land plots is not subject to VAT in Russia since 1 January 2005. These
taxes are regulated by the regional legislation and generally equal to up to 2.2 % (property
tax). Parties are not required to pay any other fees or taxes connected with the property,
besides those noted here.
The documentation shall include:
Cadastral plans and technical passport (obtained in Procedure 2)
Certificate on state registration of ownership title to the building and the certificate on
state registration of ownership title to the land plot (obtained in Procedure 3)
Extract from Unified State Register of Legal Entities (obtained in Procedure 4)
Signed sale and purchase agreement
Corporate documents and the power of attorney
Application for state registration.
78
The following table summarize legal rights of borrowers and lenders, and the availability and legal framework of credit
registries in the Russian Federation.
Getting Credit in the Russian Federation
Getting Credit Indicators (2009) Indicator
score
Private credit
bureau
Public credit
registry 5 Private bureau coverage (% of adults)
Yes NoAre data on both firms and individuals distributed? 1
Yes NoAre both positive and negative data distributed? 1
No NoDoes the registry distribute credit information from retailers, trade
creditors or utility companies as well as financial institutions?
0
Yes NoAre more than 2 years of historical credit information distributed? 1
Yes NoIs data on all loans below 1% of income per capita distributed? 1
Yes NoIs it guaranteed by law that borrowers can inspect their data in the
largest credit registry?
1
Coverage 0.014.3
3 Strength of legal rights index (0-10)
Can any business use movable assets as collateral while keeping possession of the assets; and any financial
institution accept such assets as collateral ?
Yes
Does the law allow businesses to grant a non possessory security right in a single category of revolving movable
assets, without requiring a specific description of the secured assets ?
No
Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without
requiring a specific description of the secured assets ?
No
May a security right extend to future or after-acquired assets, and may it extend automatically to the products,
proceeds or replacements of the original assets ?
No
Is a general description of debts and obligations permitted in collateral agreements, so that all types of obligations
and debts can be secured by stating a maximum amount rather than a specific amount between the parties ?
Yes
Is a collateral registry in operation, that is unified geographically and by asset type, as well as indexed by the
grantor's name of a security right ?
No
Do secured creditors have absolute priority to their collateral outside bankruptcy procedures? No
Do secured creditors have absolute priority to their collateral in bankruptcy procedures? No
Number of individuals 17,165,000 0
Number of firms 75,645 0
79
During reorganization, are secured creditors' claims exempt from an automatic stay on enforcement? No
Does the law authorize parties to agree on out of court enforcement? Yes
80
Protecting Investors in the Russian Federation
The table below provides a full breakdown of how the disclosure, director liability, and shareholder suits indexes are
calculated in the Russian Federation.
Protecting Investors Data (2009) Indicator
Extent of disclosure index (0-10) 6
What corporate body provides legally sufficient approval for the transaction? (0-3; see notes)3
Immediate disclosure to the public and/or shareholders (0-2; see notes)1
Disclosures in published periodic filings (0-2; see notes)1
Disclosures by Mr. James to board of directors (0-2; see notes)1
Requirement that an external body review the transaction before it takes place (0=no, 1=yes)0
Extent of director liability index (0-10) 2
Shareholder plaintiff's ability to hold Mr. James liable for damage the Buyer-Seller
transaction causes to the company. (0-2; see notes)
0
Shareholder plaintiff's ability to hold the approving body (the CEO or board of directors)
liable for damage to the company. (0-2; see notes)
1
Whether a court can void the transaction upon a successful claim by a shareholder plaintiff
(0-2; see notes)
0
Whether Mr. James pays damages for the harm caused to the company upon a successful
claim by the shareholder plaintiff (0=no, 1=yes)
0
Whether Mr. James repays profits made from the transaction upon a successful claim by the
shareholder plaintiff (0=no, 1=yes)
0
Whether fines and imprisonment can be applied against Mr. James (0=no, 1=yes)0
Shareholder plaintiff's ability to sue directly or derivatively for damage the transaction
causes to the company (0-1; see notes)
1
Ease of shareholder suits index (0-10) 7
Documents available to the plaintiff from the defendant and witnesses during trial (0-4; see
notes)
3
Ability of plaintiffs to directly question the defendant and witnesses during trial (0-2; see
notes)
2
Plaintiff can request categories of documents from the defendant without identifying specific
ones (0=no, 1=yes)
0
Shareholders owning 10% or less of Buyer's shares can request an inspector investigate the
transaction (0=no, 1=yes)
1
81
Level of proof required for civil suits is lower than that for criminal cases (0=no, 1=yes)1
Shareholders owning 10% or less of Buyer's shares can inspect transaction documents before
filing suit (0=no, 1=yes)
0
Strength of investor protection index (0-10) 5.0
Notes:
Extent of Disclosure Index
What corporate body provides legally sufficient approval for the transaction?
0=CEO or managing director alone; 1=shareholders or board of directors vote and Mr. James can vote; 2=board of directors
votes and Mr. James cannot vote; 3 = shareholders vote and Mr. James cannot vote
Immediate disclosure to the public and/or shareholders
0=none; 1=disclosure on the transaction only; 2=disclosure on the transaction and Mr. James' conflict of interest
Disclosures in published periodic filings
0=none; 1=disclosure on the transaction only; 2=disclosure on the transaction and Mr. James' conflict of interest
Disclosures by Mr. James to board of directors
0=none; 1=existence of a conflict without any specifics; 2= full disclosure of all material facts
Director Liability Index
Shareholder plaintiff’s ability to hold Mr. James liable for damage the Buyer-Seller transaction causes to the company
0= Mr. James is not liable or liable only if he acted fraudulently or in bad faith; 1= Mr. James is liable if he influenced the
approval or was negligent; 2= Mr. James is liable if the transaction was unfair, oppressive or prejudicial to minority
shareholders
Shareholder plaintiff’s ability to hold the approving body (the CEO or board of directors) liable for for damage to the
company
0=members of the approving body are either not liable or liable only if they acted fraudulently or in bad faith; 1=liable for
negligence in the approval of the transaction; 2=liable if the transaction is unfair, oppressive, or prejudicial to minority
shareholders
Whether a court can void the transaction upon a successful claim by a shareholder plaintiff
0=rescission is unavailable or available only in case of Seller's fraud or bad faith; 1=available when the transaction is
oppressive or prejudicial to minority shareholders; 2=available when the transaction is unfair or entails a conflict of interest
Shareholder plaintiffs’ ability to sue directly or derivatively for damage the transaction causes to the company
0=not available; 1=direct or derivative suit available for shareholders holding 10% of share capital or less
Shareholder Suits Index
Documents available to the plaintiff from the defendant and witnesses during trail
Score 1 each for (1) information that the defendant has indicated he intends to rely on for his defense; (2) information that
directly proves specific facts in the plaintiff’s claim; (3) any information that is relevant to the subject matter of the claim; and
(4) any information that may lead to the discovery of relevant information.
Ability of plaintiffs to directly question the defendant and witnesses during trial
0=no; 1=yes, with prior approval by the court of the questions posed; 2=yes, without prior approval
82
The table below addresses the taxes and mandatory contributions that a medium-size company must pay or withhold in
a given year in the Russian Federation, as well as measures of administrative burden in paying taxes.
Paying Taxes in the Russian Federation
Tax or mandatory
contribution
Payments
(number)
Notes on
Payments
Time
(hours)
Statutory tax
rate
Tax
base
Totaltax rate
(% profit)
Notes on
TTR
value added18.0% 64 1 Value Added Tax
level of
pollution
(fuel
consumption)
various rate 1 Environmental tax
water
resources
used
various rates 1 Water tax
type of
contract
various rates 1 Stamp duty on contracts
0.10engine
capacity of
vehicles
various rates 1 Transport tax
0.96cadastral
value of the
land plot
0.3%-1.5% 1 Land tax
2.82gross salaries0.2% to
8.5%
1 Accidents tax
4.66book value of
property
2.20% 1 Property tax
10.85taxable
profits
24.0% 160 1 Corporate income tax
14.15gross salaries14.00% 1 Pension tax
14.80gross salariesvarious rates
(26%-2%)
96 1 Social tax (UST)
Totals 11 320 48.3
83
Notes:
a) data not collected
b) VAT is not included in the total tax rate because it is a tax levied on consumers
c) very small amount
d) included in other taxes
e) Withheld tax
f) electronic filling available
g) paid jointly with another tax
Name of taxes have been standardized. For instance income tax, profit tax, tax on company's income are all named corporate
income tax in this table.
When there is more than one statutory tax rate, the one applicable to TaxpayerCo is reported.
The hours for VAT include all the VAT and sales taxes applicable.
The hours for Social Security include all the hours for labor taxes and mandatory contributions in general.
84
These tables list the procedures necessary to import and exports a standardized cargo of goods in the Russian Federation.
The documents required to export and import the goods are also shown.
Trading Across Borders in the Russian Federation
Nature of Export Procedures (2009) Duration (days) US$ Cost
Documents preparation 25 200
Customs clearance and technical control 3 500
Ports and terminal handling 3 250
Inland transportation and handling 5 900
Totals 36 1850
Nature of Import Procedures (2009) Duration (days) US$ Cost
Documents preparation 25 200
Customs clearance and technical control 4 500
Ports and terminal handling 2 250
Inland transportation and handling 5 900
Totals 36 1850
Export
Customs export declaration
Inspection report
Packing list
Terminal handling receipts
Bill of lading
Cargo release order
Certificate of origin
Commercial invoice
Import
Packing list
Payment documents
Shipment Export Declaration (SED)
85
Terminal handling receipts
Transaction passport/Passport Sdelki
Commercial invoice
Contract
Convention des Marchandises Routiers (CMR)
Customs Cargo Declaration (CCD)
Customs import declaration
Inspection report
Bill of lading
Cargo release order
Enforcing Contracts in the Russian Federation
This topic looks at the efficiency of contract enforcement in the Russian Federation.
IndicatorNature of Procedure (2009)
Procedures (number) 37
Time (days) 281
Filing and service 57.0
Trial and judgment 144.0
Enforcement of judgment 80.0
Cost (% of claim)* 13.40
Attorney cost (% of claim) 10.0
Court cost (% of claim) 3.4
Enforcement Cost (% of claim) 0.0
* Claim assumed to be equivalent to 200% of income per capita.
Court information: Moscow Commercial Court ("Арбитражный суд г.Москвы")
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88